<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
(State of incorporation)
13-3411414
I.R.S. EMPLOYER IDENTIFICATION NUMBER
ONE NEW YORK PLAZA, 18TH FLOOR
NEW YORK, NEW YORK 10292-2018
(212) 214-1000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
FRED ROBUSTELLI, ESQ.
PRUDENTIAL SECURITIES SECURED FINANCING CORP.
ONE SEAPORT PLAZA, 30TH FLOOR
NEW YORK, NEW YORK 10292
(Name and address of agent for service)
Copy to:
HOWARD M. HEITNER, ESQ. WARREN R. LOUI
O'MELVENY & MYERS LLP O'MELVENY & MYERS LLP
CITICORP CENTER 400 SOUTH HOPE STREET
153 EAST 53RD STREET LOS ANGELES, CALIFORNIA 90071
NEW YORK, NEW YORK 10022
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, please check the following box. [X]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===============================================================================================
Proposed
Maximum
Offering Proposed Maximum Amount of
Title of Securities Amount to be Price Per Aggregate Registration
Being Registered Registered (1) Unit (2) Offering Price (2) Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial/Multifamily $1,000,000 100% $1,000,000 $295.00
Mortgage Pass-
Through
Certificates
===============================================================================================
</TABLE>
(1) This Registration Statement and the registration fee pertain to the
initial offering of the Commercial/Multifamily Mortgage Pass-Through
Certificates registered hereunder by the Registrant and to offers and sales
relating to market-making transactions by Prudential Securities Inc., an
affiliate of the Registrant. The amount of Mortgage Pass-Through Certificates
that may be initially offered hereunder and the registration fee shall not be
affected by any offers and sales relating to any such market-making
transactions.
(2) Estimated solely for the purpose of calculating the registration
fee on the basis of the proposed maximum aggregate offering price.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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EXPLANATORY NOTE
Immediately following this explanatory note there are eight separate
sets of alternative pages labeled in the upper right corner as follows: "Version
1: Multifamily Properties", "Version 2: Office Properties", "Version 3: Retail
Properties", "Version 4: Hotel and Motel Properties", "Version 5: Health-Care
Related Properties", "Version 6: Industrial Properties", "Version 7: Warehouse,
Mini-Warehouse and Self-Storage Facilities", "Version 8: Mobile Home Parks".
Each such "version" contains inserts to the Prospectus and each Prospectus
Supplement included herein showing the text specific to a material concentration
in each of the eight specified types of properties (that is, multifamily
properties, office properties, retail properties, hotel and motel properties,
health care-related facilities, industrial properties, warehouse, mini-warehouse
and self-storage facilities, and mobile home parks).
The above described eight "versions" of changes to the Prospectus and
each Prospectus Supplement included herein are being filed with this
Registration Statement for purposes of identifying changes that will be made
thereto as a result of a material concentration in any of the eight specified
types of properties in any specific securitization transaction. Depending on the
types of properties that constitute a material concentration in any particular
transaction, the respective changes to the Prospectus and each Prospectus
Supplement outlined in the above described "versions" would be included in the
specific Prospectus and Prospectus Supplement for that transaction. When
multiple sets of inserts are to be included in the specific Prospectus and
Prospectus Supplement for any particular transaction, these inserts will be
included in each appropriate location in an order that goes from highest
material concentration to lowest material concentration (provided that
single-sentence inserts that simply identify properties that involve a material
concentration may be combined but will still present such properties in the
aforementioned order). The specific Prospectus and Prospectus Supplement for
each particular transaction reflecting these changes would be filed at the time
and in the manner provided by Rule 424 under the Securities Act of 1933.
1
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Version 1: Multifamily Properties
[The following is to be inserted, as indicated by starred brackets ([**
// **]) on the next page, on the cover of the Prospectus as a new sentence in
the paragraph captioned "The Trust Funds --".]
Multifamily properties consisting of multiple rental or cooperatively
owned dwellings will represent security for a material concentration of the
mortgage loans comprising each trust fund, based on principal balances at the
time each series of certificates issued.
2
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Version 1: Multifamily Properties
THE TRUST FUNDS-
A new trust fund will be established to issue each series of certificates. Each
trust fund will consist of:
o a pool of mortgage loans secured by liens on commercial and/or multifamily
residential properties; and
o other assets specified in the accompanying prospectus supplement, including
any credit enhancement, participation interests in mortgage loans,
installment contracts for the sale of mortgaged properties or mortgage
pass-through certificates.
[**Multifamily properties consisting of multiple rental or cooperatively owned
dwellings will represent security for a material concentration of the mortgage
loans comprising each trust fund, based on principal balances at the time each
series of certificates is issued.**]
3
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Version 1: Multifamily Properties
[The following is to be inserted in the Prospectus immediately
following "Risk Factors -- Commercial and multifamily mortgage loans are subject
to special risks which may affect your investment":]
RISKS PARTICULAR TO In addition to risks generally associated with real
MULTIFAMILY RENTAL estate, adverse economic conditions, either local,
PROPERTIES regional or national, 1) may limit the amount of rent
that can be charged for rental units, 2) may adversely
affect tenants' ability to pay rent and 3) may result in
a reduction in timely rent payments or a reduction in
occupancy levels without a corresponding decrease in
expenses. Construction of additional housing units,
local military base closings, company relocations and
closings and national and local politics, including
current or future rent stabilization and rent control
laws and agreements may also affect occupancy and rent
levels. Since multifamily rental property is typically
leased on a short-term basis, its occupancy rate may be
subject to rapid decline, including for some of the
foregoing reasons. In addition, reductions in the level
of mortgage interest rates may encourage tenants in
multifamily rental properties to purchase single-family
housing rather than continue to lease housing. In
addition, the characteristics of a neighborhood may
change over time or in relation to newer developments
reducing the mortgage property's value and the cash flow
therefrom. Further, the cost of operating a multifamily
rental property may increase, including the cost of
utilities and the costs of required capital
expenditures. Also, multifamily rental properties may be
subject to rent control laws which could impact the
future cash flows of such properties.
Certain multifamily rental properties are eligible to
receive low-income housing tax credits pursuant to
Section 42 of the Code ("Section 42 Properties").
However, rent limitations associated therewith may
adversely affect the ability of the applicable borrowers
to increase rents to maintain such mortgaged properties
in proper condition during periods of rapid inflation or
declining market value of such mortgaged properties. In
addition, the income restrictions on tenants imposed by
Section 42 of the Code may reduce the number of eligible
tenants in such mortgaged properties and result in a
reduction in occupancy rates applicable thereto.
Furthermore, some eligible tenants may not find any
differences in rents between the Section 42 Properties
and other multifamily rental properties in the same area
to be a sufficient economic incentive to reside at a
Section 42 Property, which may have fewer amenities or
otherwise be less attractive as a residence. All of
these conditions and events may increase the possibility
that a borrower may be unable to meet its obligations
under its mortgage loan.
RISKS PARTICULAR TO Generally, a tenant-shareholder of a cooperative
COOPERATIVELY-OWNED corporation must make a monthly maintenance payment to
APARTMENT BUILDINGS the cooperative corporation that owns the subject
apartment building. Such payment represents the
tenant-shareholder's proportional share of the
corporation's payments in respect of the mortgage loan
secured by, and all real property taxes, maintenance
expenses and other capital and ordinary expenses with
respect to, such property, less any other income that
the cooperative corporation may realize. In addition to
risks generally associated with real estate, adverse
economic conditions, either local regional or national,
may impair the financial conditions of individual
tenant-shareholders or their ability to sub-let the
subject apartments, reducing the likelihood tenants can
make required maintenance payments. The lender on any
mortgage loan secured by such building will be subject
to all the risks that it would have in connection with
lending on the security of a multifamily rental
property. See "Risks Particular to Multifamily Rental
Properties" above. In addition, if in connection with
any cooperative conversion of an apartment building, the
sponsor holds the shares allocated to a large number of
the apartment units, any lender secured by a mortgage on
such building will be subject to a risk associated with
such sponsor's creditworthiness.
4
<PAGE>
Version 1: Multifamily Properties
[The following is to be inserted in the Prospectus immediately
following "The Mortgage Pools--General":]
MORTGAGE LOANS SECURED BY MULTIFAMILY RENTAL PROPERTIES.
Significant factors determining the value and successful operation of a
multifamily rental property are 1) the location of the property, 2) the number
of competing residential developments in the local market (such as apartment
buildings, manufactured housing communities and single family homes), 3) the
physical attributes of the multifamily building (such as its age and appearance)
and 4) state and local regulations affecting such property. In addition, the
successful operation of an apartment building will depend upon other factors
such as its reputation, the ability of management to provide adequate
maintenance and insurance, and the types of services it provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection. For
example, there are provisions that limit the basis on which a landlord may
terminate a tenancy or increase its rent or prohibit a landlord from terminating
a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment buildings.
These ordinances may limit rent increases to fixed percentages, to percentages
of increases in the consumer price index, to increases set or approved by a
governmental agency, or to increases determined through mediation or binding
arbitration. In many cases, the rent control laws do not provide for decontrol
of rental rates upon vacancy of individual units. 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, regional or national, 1) may
limit the amount of rent that can be charged for rental units, 2) may adversely
affect tenants' ability to pay rent and 3) may result in a reduction in timely
rent payments or a reduction in occupancy levels without a corresponding
decrease in expenses. Construction of additional housing units, local military
base closings, company relocations and closings and national and local politics,
including current or future rent stabilization and rent control laws and
agreements may also affect occupancy and rent levels. Since multifamily rental
property is typically leased on a short-term basis, its occupancy rate may
subject to rapid decline, including for some of the foregoing reasons. In
addition, reductions in the level of mortgage interest rates may encourage
tenants in multifamily rental properties to purchase single-family housing
rather than continue to lease housing. In addition, the characteristics of a
neighborhood may change over time or in relation to newer developments reducing
the mortgage property's value and the cash flow therefrom.
MORTGAGE LOANS SECURED BY COOPERATIVELY-OWNED APARTMENT BUILDINGS.
A cooperative apartment building and the land under the building are
owned or leased by a non-profit cooperative corporation. The cooperative
corporation is in turn owned by tenant-shareholders who, through ownership of
stock, shares or membership certificates in the corporation, receive proprietary
leases or occupancy agreements which confer exclusive rights to occupy specific
apartments or units. Generally, a tenant-shareholder of a cooperative
corporation must make a monthly maintenance payment to the corporation
representing such tenant-shareholder's pro rata share of the corporation's
payments in respect of any mortgage loan secured by, and all real property
taxes, maintenance expenses and other capital and ordinary expenses with respect
to, the real property owned by such cooperative corporation, less any other
income that the cooperative corporation may realize. Such payments to the
cooperative corporation are in addition to any payments of principal and
interest the tenant-shareholder must make on any loans of the tenant-shareholder
secured by its shares in the corporation.
A cooperative corporation is directly responsible for building
management and payment of real estate taxes and hazard and liability insurance
premiums. A cooperative corporation's ability to meet debt service obligations
on a mortgage loan secured by the real property owned by such corporation, as
well as all other
5
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Version 1: Multifamily Properties
operating expenses of such property, depends primarily upon receiving
maintenance payments from the tenant-shareholders, together with any rental
income from units or commercial space that the cooperative corporation might
control. Unanticipated expenditures may, in some cases, have to be paid by
special assessments on the tenant-shareholders. A cooperative corporation's
ability to pay the amount of any balloon payment due at the maturity of a
mortgage loan secured by the real property owned by such cooperative corporation
depends primarily on its ability to refinance the mortgage loan. Neither the
depositor nor any other person will have any obligation to provide refinancing
for any of the mortgage loans.
In a typical cooperative conversion plan, the owner of a rental
apartment building contracts to sell the building to a newly formed cooperative
corporation. The owner or sponsor allocates shares to each apartment unit, and
the current tenants may subscribe during a certain period at discounted prices
relative to prices offered to the public after such period. As part of the
consideration for the sale, the owner or sponsor receives all the unsold shares
of the cooperative corporation. The sponsor usually also controls the
corporation's board of directors and management for a limited period of time.
Each purchaser of shares in the cooperative corporation generally
enters into a long-term proprietary lease which provides the shareholder with
the right to occupy a particular apartment unit. However, many cooperative
conversion plans are "non-eviction" plans. Under a non-eviction plan, a tenant
at the time of conversion who chooses not to purchase shares is entitled to
reside in the unit as a subtenant from the owner of the shares allocated to such
apartment unit. Any applicable rent control or rent stabilization laws would
continue to be applicable to such subtenancy. The subtenant may also be entitled
to renew its lease for an indefinite number of times, with continued protection
from rent increases above those permitted by any applicable rent control and
rent stabilization laws. The shareholder is responsible for the maintenance
payments to the cooperative without regard to its receipt or non-receipt of rent
from the subtenant, which may be lower than maintenance payments on the unit.
Newly-formed cooperative corporations typically have the greatest concentration
of non-tenant shareholders.
6
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Version 1: Multifamily Properties
[The following is to be inserted in the Prospectus Supplement
immediately following "Risk Factors--Book-Entry Registration":]
RISKS PARTICULAR TO _____ of the mortgage loans, which represent ___% of
MULTIFAMILY PROPERTIES the initial pool balance, are secured by mortgages on
fee or leasehold interests in multifamily properties.
Mortgage loans that are secured by liens on such types
of properties are exposed to certain unique risks. For
more detailed information, you should refer to the
sections in the accompanying prospectus titled "Risks
particular to multifamily rental properties," "Risks
particular to cooperatively-owned apartment buildings,"
"Mortgage Loans Secured by Multifamily Rental
Properties" and "Mortgage Loans Secured by
Cooperatively-Owned Apartment Buildings."
7
<PAGE>
Version 2: Office Properties
[The following is to be inserted, as indicated by starred brackets ([**
// **]) on the next page, on the cover of the Prospectus as a new sentence in
the paragraph captioned "The Trust Funds --".]
Office properties will represent security for a material concentration
of the mortgage loans comprising each trust fund, based on principal balances at
the time each series of certificates is issued.
8
<PAGE>
Version 2: Office Properties
THE TRUST FUNDS-
A new trust fund will be established to issue each series of certificates. Each
trust fund will consist of:
o a pool of mortgage loans secured by liens on commercial and/or multifamily
residential properties; and
o other assets specified in the accompanying prospectus supplement, including
any credit enhancement, participation interests in mortgage loans,
installment contracts for the sale of mortgaged properties or mortgage
pass-through certificates.
[** Office properties will represent security for a material concentration of
the mortgage loans comprising each trust fund, based on principal balances at
the time each series of certificates is issued.**]
9
<PAGE>
Version 2: Office Properties
[The following is to be inserted in the Prospectus immediately
following "Risk Factors -- Commercial and multifamily mortgage loans are subject
to special risks which may affect your investment":]
RISKS PARTICULAR TO In addition to risks generally associated with real
OFFICE PROPERTIES estate, cash flows from mortgage loans secured by office
properties are also significantly affected by the
following factors: 1) adverse changes in population and
economic growth, which generally create demand for
office space; 2) local competitive conditions, including
the supply of office space or construction of new
competitive office buildings; 3) the quality and
management philosophy of the management; 4) the
attractiveness of the properties and the surrounding
neighborhood to tenants and their customers or clients;
and 5) the necessity of major repairs or improvements to
satisfy the needs of tenants. Office properties that are
not equipped to accommodate the needs of modern business
may become functionally obsolete and thus
non-competitive. In addition, an economic decline in the
businesses operated by their tenants may reduce the
office property's value and cash flows therefrom. Such
decline may result in one or more significant tenants
ceasing operations at such locations (which may occur on
account of a voluntary decision not to renew a lease,
bankruptcy or insolvency of such tenants, such tenants'
general cessation of business activities or for other
reasons). The risk of such an economic decline increases
if revenue is dependent on a single tenant or if there
is a significant concentration of tenants in a
particular business or industry.
10
<PAGE>
Version 2: Office Properties
[The following is to be inserted in the Prospectus immediately
following "The Mortgage Pools -- General":]
MORTGAGE LOANS SECURED BY OFFICE PROPERTIES.
Significant factors affecting the value of office properties include:
1) the quality of the tenants in the building, 2) the physical
attributes of the building in relation to competing buildings, 3) the location
of the building with respect to the central business district or population
centers, 4) demographic trends within the metropolitan area to move away from or
towards the central business district, 5) social trends combined with space
management trends (which may change towards options such as telecommuting ), 6)
tax incentives offered to businesses by cities or suburbs adjacent to or near
the city where the building is located and 7) the strength and stability of the
market area as a desirable business location. An economic decline in the
businesses operated by their tenants may reduce the office property's value and
cash flow therefrom. The risk of such an economic decline 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.
The expiration of space leases and the ability of the respective
borrowers to renew or relet the space on comparable terms affect repayment of
the related mortgage loans. Even if vacated space is successfully relet, the
costs associated with reletting, including tenant improvements, leasing
commissions and free rent, could be substantial and could reduce cash flow from
the office properties. The correlation between the success of tenant businesses
and property value is increased when the property is a single tenant property.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a building's 1) age,
2) condition, 3) design (including floor sizes and layout), 4) access to
transportation, 5) availability of parking and 6) ability to offer certain
amenities to its tenants (including sophisticated building systems, such as
fiberoptic cables, satellite communications or other base building technological
features). Office properties that are not equipped to accommodate the needs of
modern business may become functionally obsolete and thus non-competitive.
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 matters, such as schools and cultural amenities. A central
business district may have a substantially different economy from that of a
suburb. The local economy will affect an office property's ability to attract
stable tenants on a consistent basis. In addition, the cost of refitting office
space for a new tenant is often higher than for other property types.
11
<PAGE>
Version 2: Office Properties
[The following is to be inserted in the Prospectus Supplement
immediately following "Risk Factors--Book-Entry Registration":]
RISKS PARTICULAR TO _______ of the mortgage loans, which present ___% of
OFFICE PROPERTIES the initial pool balance, are secured by mortgages on
fee and/or leasehold interests in office properties.
Mortgage loans that are secured by liens on such types
of properties are exposed to certain unique risks. For
more detailed information, you should refer to the
sections in the accompanying prospectus titled "Risks
particular to office properties" and "Mortgage Loans
Secured by Office Properties."
12
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Version 3: Retail Properties
[The following is to be inserted, as indicated by starred brackets ([**
// **]) on the next page, on the cover of the Prospectus as a new sentence in
the paragraph captioned "The Trust Funds --".]
Retail properties consisting of multiple rental or cooperatively owned
dwellings will represent security for a material concentration of the mortgage
loans comprising each trust fund, based on principal balances at the time each
series of certificates is issued.
13
<PAGE>
Version 3: Retail Properties
THE TRUST FUNDS-
A new trust fund will be established to issue each series of certificates. Each
trust fund will consist of:
o a pool of mortgage loans secured by liens on commercial and/or multifamily
residential properties; and
o other assets specified in the accompanying prospectus supplement, including
any credit enhancement, participation interests in mortgage loans,
installment contracts for the sale of mortgaged properties or mortgage
pass-through certificates.
Retail properties will represent security for a material concentration of the
mortgage loans comprising each trust fund, based on principal balances at the
time each series of certificates is issued.
14
<PAGE>
Version 3: Retail Properties
[The following is to be inserted in the Prospectus immediately
following "Risk Factors -- Commercial and multifamily mortgage loans are subject
to special risks which may affect your investment":]
RISKS PARTICULAR TO In addition to risks generally associated with real
RETAIL PROPERTIES estate, cash flows from mortgage loans secured by retail
properties are also significantly affected by the
following factors: 1) adverse changes in consumer
spending patterns; 2) local competitive conditions,
including the supply of retail space or the existence or
construction of new competitive shopping centers or
shopping malls; 3) alternative forms of retailing, such
as direct mail, video shopping networks and selling
through the Internet, which reduce demand for retail
space by retail companies; 4) the quality and management
philosophy of the management; 5) the attractiveness of
the properties and surrounding neighborhood to tenants
and their customers; 6) the public perception of the
safety of customers (at shopping malls and shopping
centers, for example); and 7) the necessity of major
repairs or improvements to satisfy the needs of tenants.
Retail properties may be adversely affected if an anchor
or other significant tenant ceases operations at such
locations (which may occur on account of a decision not
to renew a lease, bankruptcy or insolvency of such
tenant, such tenant's general cessation of business
activities or for other reasons). Significant tenants at
a shopping center play an important part in generating
customer traffic and making the property a desirable
location for other tenants at such property. In
addition, certain tenants at retail properties may be
entitled to terminate their leases if an anchor tenant
ceases operations at such property.
15
<PAGE>
Version 3: Retail Properties
[The following is to be inserted in the Prospectus immediately
following "The Mortgage Pools -- General":]
MORTGAGE LOANS SECURED BY RETAIL PROPERTIES
Retail properties generally derive all or a substantial percentage of
their income from lease payments from commercial tenants. Income from and the
market value of retail properties depends on various factors including, but not
limited to, 1) the ability to lease space in such properties, 2) the ability of
tenants to meet their lease obligations, 3) the possibility of a significant
tenant becoming bankrupt or insolvent, and 4) other fundamental aspects of real
estate such as location and market demographics.
The correlation between the success of tenant businesses and property
value is more direct with respect to retail properties than other types of
commercial property because (a significant component) of the total rent paid by
retail tenants is often tied to a percentage of gross sales. Declines in tenant
sales will cause a corresponding decline in percentage rents, and may also cause
such tenants to become unable to pay their base rent or other occupancy costs.
The default by a tenant under its lease could result in delays and costs in
enforcing the lessor's rights. Repayment of the related mortgage loans will be
affected by the expiration of space leases and the ability of the respective
borrowers to renew or relet the space on comparable terms. Even if vacated space
is successfully relet, the costs associated with reletting, including tenant
improvements, leasing commissions and free rent, could be substantial and could
reduce cash flow from the retail properties. The correlation between the success
of tenant businesses and property value is increased when the property is a
single tenant property.
Whether a shopping center is "anchored" or "unanchored" is also an
important distinction. Anchor tenants in shopping centers traditionally have
been a major factor in the public's perception of a shopping center. The anchor
tenants at a shopping center play an important part in generating customer
traffic and making a center a desirable location for other tenants of the
center. An anchor tenant's failure to renew its lease, the termination of its
lease, its bankruptcy or economic decline, or its cessation of the business
(notwithstanding any continued payment of rent) can materially reduce the
economic performance of a shopping center. Furthermore, the correlation between
the success of tenant businesses and property value is increased when the
property is a single tenant property.
Unlike certain other types of commercial properties, retail properties
also face competition from sources outside a given real estate market. Catalogue
retailers, home shopping networks, telemarketing, selling through the Internet,
and outlet centers all compete with more traditional retail properties for
consumer dollars. Continued growth of these alternative retail outlets (which
are often characterized by lower operating costs) could adversely affect value
of and cash flow from related retail properties.
16
<PAGE>
Version 3: Retail Properties
[The following is to be inserted in the Prospectus immediately
following "Risk Factors -- Book-Entry Registration":]
RISKS PARTICULAR TO _____ of the mortgage loans, which represent _____ % of
RETAIL PROPERTIES the initial pool balance, are secured by mortgages on
fee and/or leasehold interests in retail properties.
Mortgage loans that are secured by liens on such types
of properties are exposed to certain unique risks. For
more detailed information, you should refer to the
sections in the accompanying prospectus titled "Risks
particular to retail properties" and "Mortgage Loans
Secured by Retail Properties."
17
<PAGE>
Version 4: Hotel and Motel Properties
[The following is to be inserted, as indicated by starred brackets ([**
// **]) on the next page, on the cover of the Prospectus as a new sentence in
the paragraph captioned "The Trust Funds --".]
Hotel and motel properties will represent security for a material
concentration of the mortgage loans comprising each trust fund, based on
principal balances at the time each series of certificates is issued.
18
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Version 4: Hotel and Motel Properties
THE TRUST FUNDS-
A new trust fund will be established to issue each series of certificates. Each
trust fund will consist of:
o a pool of mortgage loans secured by liens on commercial and/or multifamily
residential properties; and
o other assets specified in the accompanying prospectus supplement, including
any credit enhancement, participation interests in mortgage loans,
installment contracts for the sale of mortgaged properties or mortgage
pass-through certificates.
[** Hotel and motel properties will represent security for a material
concentration of the mortgage loans comprising each trust fund, based on
principal balances at the time each series of certificates is issued.**]
19
<PAGE>
Version 4: Hotel and Motel Properties
[The following is to be inserted in the Prospectus immediately
following "Risk Factors -- Commercial and multifamily mortgage loans are subject
to special risks which may affect your investment":]
RISKS PARTICULAR TO In addition to risks generally associated with real
HOTEL AND AND MOTEL estate, hotel properties motel properties are subject to
operating risks common to the lodging industry. These
risks include, among other things, 1) a high level of
continuing capital expenditures to keep necessary
furniture, fixtures and equipment updated, 2)
competition from other hotels and motels, 3) increases
in operating costs (which increases may not necessarily
in the future be offset by increased room rates), 4)
dependence on business and commercial travelers and
tourism, 5) increases in energy costs and other expenses
of travel and 6) adverse effects of national, regional
and local economic conditions. These factors could
reduce the related borrower's ability to make payments
on the related Mortgage Loans. Since limited service
hotels and motels are relatively quick and inexpensive
to construct and may quickly achieve an initially
positive value, an over-building of such hotels and
motels could occur in any given region, which would
likely reduce occupancy and daily room rates. (The
availability of construction capital is generally
independent from the primary drivers of room demand.)
Further, because hotel and motel rooms are generally
rented for short periods of time, hotel and motel
properties tend to be more sensitive to adverse economic
conditions and competition than many other commercial
properties. Additionally, the revenues of certain hotels
and motels, particularly those located in regions whose
economies depend upon tourism, may be highly seasonal in
nature.
A hotel or motel property may present additional risks
as compared to other commercial property types in that:
(1) hotels and motels may be operated pursuant to
franchise, management and operating agreements that may
be terminable by the franchiser, the manager or the
operator;
(2) the transferability of any operating, liquor
and other licenses to the entity acquiring such hotel or
motel (either through purchase or foreclosure) is
subject to local law requirements;
(3) it may be difficult to terminate an ineffective
operator of a hotel or motel property subsequent to a
foreclosure of such property; and
(4) future occupancy rates may be adversely
affected by, among other factors, any negative
perception of a hotel or motel based upon its historical
reputation.
Hotel and motel properties may be operated pursuant to
franchise agreements. The continuation of franchises is
typically subject to specified operating standards and
other terms and conditions. The franchiser periodically
inspects its licensed properties to confirm adherence to
its operating standards. The failure of the hotel or
motel property to maintain such standards or adhere to
such other terms and conditions could result in the loss
or cancellation of the franchise agreement. The
franchiser could possibly condition the continuation of
a franchise agreement on the completion of capital
improvements or making certain capital expenditures that
the related borrower determines are too expensive or are
otherwise unwarranted in light of general economic
conditions or the operating results or prospects of the
affected hotels. In that event, the related borrower may
elect to allow the franchise agreement to lapse. In any
case, if the franchise is terminated, the related
borrower may seek to obtain a suitable replacement
franchise or to operate such hotel or motel property
independently of a franchise license. The loss of a
franchise agreement could have a material adverse effect
upon the operations or the underlying value of the hotel
or motel covered by the franchise because of the loss of
associated name recognition, marketing support and
centralized reservation systems provided by the
franchiser.
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<PAGE>
Version 4: Hotel and Motel Properties
[The following is to be inserted in the Prospectus immediately following "The
Mortgage Pools -- General":]
MORTGAGE LOANS SECURED BY HOTEL AND MOTEL PROPERTIES.
Hotel and motel properties may include full service hotels, resort
hotels with many amenities, limited service hotels, hotels and motels associated
with national franchise chains, hotels and motels associated with regional
franchise chains and hotels that are not affiliated with any franchise chain but
may have their own brand identity. Various factors, including location, quality
and franchise affiliation affect the economic performance of a hotel or motel.
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 and motels can have similar
effects. To meet competition in the industry and to maintain economic values,
continuing expenditures must be made for modernizing, refurbishing, and
maintaining existing facilities prior to the expiration of their anticipated
useful lives. Because hotel and motel rooms generally are rented for short
periods of time, hotels and motels 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 or motel may have an impact on quality of service and economic
performance. Additionally, the lodging industry, in certain locations, 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.
The viability of any hotel or motel property that is part of a national
or regional hotel or motel chain depends in part on the continued existence and
financial strength of the franchiser, the public perception of the franchise
service mark and the duration of the franchise agreement. The transferability of
franchise agreements may be restricted and, in the event of a foreclosure on any
such hotel or motel property, the consent of the franchiser for the continued
use of the franchise by the hotel or motel property would be required.
Conversely, a lender may be unable to remove a franchiser that it desires to
replace following a foreclosure. Further, in the event of a foreclosure on a
hotel or motel property, it is unlikely that the purchaser of such hotel or
motel property would be entitled to the rights under any associated liquor
license, and such purchaser would be required to apply in its own right for such
license. There can be no assurance that a new license could be obtained or that
it could be obtained promptly.
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Version 4: Hotel and Motel Properties
[The following is to be inserted in the Prospectus Supplement
immediately following "Risk Factors -- Book-Entry Registration":]
RISKS PARTICULAR TO _____ of the mortgage loans, which represent _____% of
HOTEL AND MOTEL the initial poll balance, are secured by mortgages on
PROPERTIES fee and/or leasehold interests in hotels and motels.
Mortgage loans that are secured by liens on such types
of properties are exposed to certain unique risks. For
more detailed information, you should refer to the
sections in this prospectus titled "Risks particular to
hotel and motel properties" and "Mortgage Loans Secured
by Hotel and Motel Properties."
22
<PAGE>
Version 5: Health-Care Related Properties
[The following is to be inserted, as indicated by starred brackets ([**
// **]) on the next page, on the cover of the Prospectus as a new sentence in
the paragraph captioned "The Trust Funds --".]
Health-care related properties will represent security for a material
concentration of the mortgage loans comprising each trust fund, based on
principal balances at the time each series of certificates is issued.
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Version 5: Health-Care Related Properties
THE TRUST FUNDS-
A new trust fund will be established to issue each series of certificates. Each
trust fund will consist of:
o a pool of mortgage loans secured by liens on commercial and/or multifamily
residential properties; and
o other assets specified in the accompanying prospectus supplement, including
any credit enhancement, participation interests in mortgage loans,
installment contracts for the sale of mortgaged properties or mortgage
pass-through certificates.
[** Health-care related properties will represent security for a material
concentration of the mortgage loans comprising each trust fund, based on
principal balances at the time each series of certificates is issued.**]
24
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Version 5: Health-Care Related Properties
[The following is to be inserted in the Prospectus immediately
following "Risk Factors -- Commercial and multifamily mortgage loans are subject
to special risks which may affect your investment":]
RISKS PARTICULAR TO In addition to risks generally associated with real
HEALTH-CARE RELATED estate, certain types of health care-related facilities
PROPERTIES (including nursing homes) typically receive a
substantial portion of their revenues from government
reimbursement programs, primarily Medicaid and Medicare.
Medicaid and Medicare are subject to 1) statutory and
regulatory changes, 2) retroactive rate adjustments, 3)
administrative rulings, 4) policy interpretations, 5)
delays by fiscal intermediaries and 6) government
funding restrictions, all of which can reduce revenues
from operation. Moreover, governmental payors have
employed cost-containment measures that limit payments
to health care providers and various proposals for
national health care relief could, if enacted, further
limit these payments.
In addition, providers of long-term nursing care and
other medical services are highly regulated by federal,
state and local law and are subject to, among other
things, 1) federal and state licensing requirements, 2)
facility inspections, 3) the setting of rates and
charges, 4) governmental reimbursement policies and laws
relating to the adequacy of medical care, 5)
distribution of pharmaceuticals and equipment, 6)
personnel operating policies and 7) maintenance of and
additions to facilities and services, any or all of
which factors can increase the cost of operation and
limit growth. In extreme cases, violations of applicable
laws can result in suspension or cessation of
operations.
Under federal and state laws and regulations, Medicare
and Medicaid reimbursements are generally not permitted
to be made to any person other than the provider who
actually furnished the related medical goods and
services. Accordingly, in the event of foreclosure on a
mortgaged property that is operated as a health
care-related facility, neither the trustee nor a
subsequent lessee or operator of the mortgaged property
would generally be entitled to obtain any outstanding
reimbursement payments relating to services furnished
prior to such foreclosure. Furthermore, in the event of
foreclosure, there can be no assurance that the trustee
or purchaser in a foreclosure sale would be entitled to
the rights under any required licenses and regulatory
approvals, that a new license could be obtained or that
a new approval would be granted. In addition, health
care-related properties are generally "special purpose"
properties that are not readily converted to general
residential, retail or office use, and transfers of
health care-related properties are subject to regulatory
approvals under state, and in some cases federal, law
not required for transfers of most other types of
commercial operations and other types of real estate.
Any of the foregoing circumstances may adversely affect
a property's liquidation value.
25
<PAGE>
Version 5: Health-Care Related Properties
[The following is to be inserted in the Prospectus immediately
following "The Mortgage Pools--General":]
MORTGAGE LOANS SECURED BY HEALTH CARE-RELATED PROPERTIES.
The mortgaged properties may include senior housing, assisted living
facilities, skilled nursing facilities and acute care facilities. "Senior
Housing" generally consists of apartment-style facilities, the residents of
which are ambulatory and handle their own affairs. "Assisted Living Facilities"
are typically single or double room occupancy, dormitory-style housing
facilities which provide food service, cleaning and some personal care and
assistance with certain daily routines. "Skilled Nursing Facilities" provide
services to post trauma and frail residents with limited mobility who require
sub-acute medical treatment. "Acute Care Facilities" generally consist of
hospital and other facilities providing short-term, acute medical care services.
Certain types of health care-related properties, particularly Acute
Care Facilities and Skilled Nursing Facilities, typically receive a substantial
portion of their revenues from government reimbursement programs, primarily
Medicaid and Medicare. Medicaid and Medicare reimbursements are subject to 1)
statutory and regulatory changes, 2) retroactive rate adjustments, 3)
administrative rulings, 4) policy interpretations, 5) delays by fiscal
intermediaries and 6) government funding restrictions. Moreover, governmental
payors have employed cost-containment measures that limit payments to health
care providers, and there exist various proposals for national health care
reform that could further limit those payments. Accordingly, there can be no
assurance that payments under government reimbursement programs will, in the
future, be sufficient to fully reimburse the cost of caring for program
beneficiaries. If such payments are insufficient, net operating income of those
health care-related properties that receive revenues from those sources, and
consequently the ability of the related borrowers to meet their obligations
under any mortgage loans secured thereby, could be adversely affected.
Moreover, health care-related properties that provide medical care are
generally subject to federal and state laws that relate to the 1) adequacy of
medical care, 2) distribution of pharmaceuticals, 3) rates and charges, 4)
equipment, 5) personnel, 6) operating policies and 7) additions to facilities
and services. In addition, those facilities are subject to periodic inspection
by governmental authorities to determine compliance with various standards
necessary to continued licensing under state law and continued participation in
the Medicaid and Medicare reimbursement programs. Providers of assisted living
services are also subject to state licensing requirements in certain states. The
failure of an operator to maintain or renew any required license or regulatory
approval could prevent it from continuing operations at a health care-related
property or, if applicable, prohibit it from participating in government
reimbursement programs. Furthermore, under applicable federal and state laws,
Medicare and Medicaid reimbursements are generally not permitted to be made to
any person other than the provider who actually furnished the related medical
goods and services. Accordingly, in the event of foreclosure, neither the
Trustee nor a subsequent lessee or operator of any health care-related property
securing a defaulted mortgage loan would generally be entitled to obtain from
federal or state governments any outstanding reimbursement payments relating to
services furnished prior to such foreclosure. Any of the aforementioned
circumstances may adversely affect the ability of the related borrowers to meet
their mortgage loan obligations.
Government regulation applying specifically to Acute Care Facilities,
Skilled Nursing Facilities and Assisted Living Facilities includes health
planning legislation, enacted by most states, intended, at least in part, to
regulate the supply of nursing beds. The most common method of control is the
requirement that a state authority first make a determination of need, evidenced
by its issuance of a Certificate of Need ("CON"), before a long-term care
provider can establish a new facility, add beds to an existing facility or, in
some states, take certain other actions (for example, acquire major medical
equipment, make major capital expenditures, add services, refinance long-term
debt, or transfer ownership of a facility). States also regulate nursing bed
supply in other ways. For example, some states have imposed moratoria on the
licensing of new beds, or on the certification of new Medicaid beds, or have
discouraged the construction of new nursing facilities by limiting Medicaid
reimbursements allocable to the cost of new construction and equipment. In
general, a CON is site specific and operator specific; it cannot be transferred
from one site to another, or to another operator, without the approval of the
appropriate state agency. Accordingly, upon a foreclosure of a mortgage loan
secured by a lien on such a health care-related property, the purchaser at
foreclosure might be required to obtain a new CON or an appropriate exemption.
In addition, compliance by a purchaser with applicable regulations may in any
case require the engagement of a new operator and the issuance of a new
operating license. Upon a foreclosure, a state regulatory agency may be willing
to
26
<PAGE>
Version 5: Health-Care Related Properties
expedite any necessary review and approval process to avoid interruption of
care to a facility's residents, but there can be no assurance that any will do
so or that any necessary licenses or approvals will be issued.
Further government regulation applicable to health care-related
properties exists in the form of federal and state "fraud and abuse" laws that
generally prohibit payment or fee-splitting arrangements between health care
providers that are designed to induce or encourage the referral of patients to,
or the recommendation of, a particular provider for medical products or
services. Violation of these restrictions can result in license revocation,
civil and criminal penalties, and exclusion from participation in Medicare or
Medicaid programs. The state law restrictions in this area vary considerably
from state to state. Moreover, the federal anti-kickback law includes broad
language that potentially could be applied to a wide range of referral
arrangements, and regulations designed to create "safe harbors" under the law
provide only limited guidance. Accordingly, there can be no assurance that such
laws will be interpreted in a manner consistent with the practices of the owners
or operators of the health care-related properties that are subject to such
laws.
The operators of health care-related properties are likely to compete
on a local and regional basis with others that operate similar facilities, some
of which competitors may be better capitalized or may offer services not offered
by such operators. Other potential competitors may be owned by non-profit
organizations or government agencies supported by endowments, charitable
contributions, tax revenues and other sources not available to such operators.
The successful operation of a health care-related property will generally depend
upon the number of competing facilities in the local market, as well as upon
other factors such as 1) its age, 2) appearance, 3) reputation and management,
4) the types of services it provides and, where applicable, 5) the quality of
care and 6) the cost of that care.
27
<PAGE>
Version 5: Health-Care Related Properties
[The following is to be inserted in the Prospectus Supplement
immediately following "Risk Factors--Book-Entry Registration":]
RISKS PARTICULAR TO _____ of the mortgage loans, which represent _____ % of
HEALTH CARE-RELATED the initial pool balance, are secured by mortgages on
PROPERTIES fee and/or leasehold interests in health care-related
properties. Mortgage loans that are secured by liens on
such types of properties are exposed to certain unique
risks. For more detailed information, you should refer
to the sections in the accompanying prospectus titled
"Risks particular to health care-related properties" and
"Mortgage Loans Secured by Health Care-Related
Properties."
28
<PAGE>
Version 6: Industrial Properties
[The following is to be inserted, as indicated by starred brackets ([**
// **]) on the next page, on the cover of the Prospectus as a new sentence in
the paragraph captioned "The Trust Funds --".]
Industrial properties will represent security for a material
concentration of the mortgage loans comprising each trust fund, based on
principal balances at the time each series of certificates is issued.
29
<PAGE>
Version 6: Industrial Properties
THE TRUST FUNDS-
A new trust fund will be established to issue each series of certificates. Each
trust fund will consist of:
o a pool of mortgage loans secured by liens on commercial and/or multifamily
residential properties; and
o other assets specified in the accompanying prospectus supplement, including
any credit enhancement, participation interests in mortgage loans,
installment contracts for the sale of mortgaged properties or mortgage
pass-through certificates.
[** Industrial properties will represent security for a material concentration
of the mortgage loans comprising each trust fund, based on principal balances at
the time each series of certificates is issued.**]
30
<PAGE>
Version 6: Industrial Properties
[The following is to be inserted in the Prospectus immediately
following "Risk Factors -- Commercial and multifamily mortgage loans are subject
to special risks which may affect your investment":]
RISKS PARTICULAR TO In addition to risks generally associated with real
INDUSTRIAL PROPERTIES estate, industrial properties may be adversely affected
by reduced demand for industrial space occasioned by a
decline in a particular industry segment and/or by a
general slow-down in the economy. In addition, an
industrial property that suited the particular needs of
its original tenant may be difficult to relet to another
tenant or may become functionally obsolete relative to
newer properties. Furthermore, industrial properties may
be adversely affected by the availability of labor
sources or a change in the proximity of supply sources.
Because industrial properties frequently have a single
tenant, any such property is heavily dependent on the
success of such tenant's business.
31
<PAGE>
Version 6: Industrial Properties
[The following is to be inserted in the Prospectus immediately
following "The Mortgage Pools - General":]
MORTGAGE LOANS SECURED BY INDUSTRIAL PROPERTIES.
Significant factors that affect the value of industrial properties are
1) the quality of tenants, 2) building design and 3) adaptability and the
location of the property. Industrial properties may be adversely affected by
reduced demand for industrial space occasioned by a decline in a particular
industry segment and/or by a general slow-down in the economy. In addition, an
industrial property that suited the particular needs of its original tenant may
be difficult to relet to another tenant or may become functionally obsolete
relative to newer properties. Furthermore, industrial properties may be
adversely affected by the availability of labor sources or a change in the
proximity of supply sources. Because industrial properties frequently have a
single tenant, any such property is heavily dependent on the success of such
tenant's business.
Aspects of building site, design and adaptability affect the value of
an industrial property. Site characteristics which are valuable to an industrial
property include 1) clear heights, 2) column spacing, 3) number of bays and bay
depths, 4) divisibility, 5) floor loading capacities, 6) truck turning radius
and 7) overall functionality and accessibility. Nevertheless, site
characteristics of an industrial property suitable for one tenant may not be
appropriate for other potential tenants, which may make it difficult to relet
the property.
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Further, industrial properties may be adversely affected by economic declines in
the industry segment of their tenants.
32
<PAGE>
Version 6: Industrial Properties
[The following is to be inserted in the Prospectus Supplement
immediately following "Risk Factors--Book-Entry Registration":]
RISKS PARTICULAR TO _____ of the mortgage loans, which represent _____ % of
INDUSTRIAL PROPERTIES the initial pool balance, are secured by mortgages on
fee and/or leasehold interests in industrial properties.
Mortgage loans that are secured by liens on such types
of properties are exposed to certain unique risks. For
more detailed information, you should refer to the
sections in the accompanying prospectus titled "Risks
particular to industrial properties" and "Mortgage Loans
Secured by Industrial Properties."
33
<PAGE>
Version 7: Self-Storage Facilities
[The following is to be inserted, as indicated by starred brackets ([**
// **]) on the next page, on the cover of the Prospectus as a new sentence in
the paragraph captioned "The Trust Funds --".]
Warehouse, mini-warehouse and self-storage facilities will represent
security for a material concentration of the mortgage loans comprising each
trust fund, based on principal balances at the time each series of certificates
is issued.
34
<PAGE>
Version 7: Self-Storage Facilities
THE TRUST FUNDS-
A new trust fund will be established to issue each series of certificates. Each
trust fund will consist of:
o a pool of mortgage loans secured by liens on commercial and/or multifamily
residential properties; and
o other assets specified in the accompanying prospectus supplement, including
any credit enhancement, participation interests in mortgage loans,
installment contracts for the sale of mortgaged properties or mortgage
pass-through certificates.
[** Warehouse, mini-warehouse and self-storage facilities properties will
represent security for a material concentration of the mortgage loans comprising
each trust fund, based on principal balances at the time each series of
certificates is issued.**]
35
<PAGE>
Version 7: Self-Storage Facilities
[The following is to be inserted in the Prospectus immediately
following "Risk Factors -- Commercial and multifamily mortgage loans are subject
to special risks which may affect your investment":]
RISKS PARTICULAR TO In addition to risks generally associated with real
SELF-STORAGE estate, warehouse, mini-warehouse and self-storage
FACILITIES properties ("Storage Properties") are considered
vulnerable to competition because both acquisition costs
and break-even occupancy are relatively low. The
conversion of Storage Properties to alternative uses
would generally require substantial capital
expenditures. Thus, if the operation of any of the
Storage 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 Storage Property may be
substantially less, relative to the amount owing on the
mortgage loan, than would be the case if the Storage
Property were readily adaptable to other uses. Tenant
privacy, anonymity and efficient access are important to
the success of a Storage Property, as is building design
and location.
36
<PAGE>
Version 7: Self-Storage Facilities
[The following is to be inserted in the Prospectus immediately
following "The Mortgage Pools -- General":]
MORTGAGE LOANS SECURED BY WAREHOUSE, MINI-WAREHOUSE
AND SELF-STORAGE FACILITIES.
Because of relatively low acquisition costs and break-even occupancy
rates, warehouse, mini-warehouse and self-storage properties ("Storage
Properties") are considered vulnerable to competition. Despite their relatively
low acquisition costs, and because of their particular building characteristics,
Storage Properties would require substantial capital investments in order to
adapt them to alternative uses. Limited adaptability to other uses may
substantially reduce the liquidation value of a Storage Property. In addition to
competition, factors that affect the success of a Storage Property include 1)
the location and visibility of the facility, 2) the facility's proximity to
apartment complexes or commercial users, 3) the trends of apartment tenants in
the area moving to single-family homes, 4) the services provided (such as
security and accessibility), 5) the age of improvements, 6) the appearance of
the improvements and 7) the quality of management.
37
<PAGE>
Version 7: Self-Storage Facilities
[The following is to be inserted in the Prospectus Supplement
immediately following "Risk Factors--Book-Entry Registration":]
RISKS PARTICULAR TO ______ of the mortgage loans, which represent _____% of
SELF-STORAGE the initial pool balance, are secured by mortgages on
FACILITIES fee and/or leasehold interests in warehouse,
mini-warehouse and self-storage facilities. Mortgage
loans that are secured by liens on such types of
properties are exposed to certain unique risks. For more
detailed information, you should refer to the sections
in the accompanying prospectus titled "Risks particular
to self-storage facilities" and "Mortgage Loans Secured
by Warehouse, Mini-Warehouse and Self-Storage
Facilities."
38
<PAGE>
Version 8: Mobile Home Parks
[The following is to be inserted, as indicated by starred brackets ([**
// **]) on the next page, on the cover of the Prospectus as a new sentence in
the paragraph captioned "The Trust Funds --".]
Mobile home parks consisting of multiple rental or cooperatively owned
dwellings will represent security for a material concentration of the mortgage
loans comprising each trust fund, based on principal balances at the time each
series of certificates is issued.
39
<PAGE>
Version 8: Mobile Home Parks
THE TRUST FUNDS-
A new trust fund will be established to issue each series of certificates. Each
trust fund will consist of:
o a pool of mortgage loans secured by liens on commercial and/or multifamily
residential properties; and
o other assets specified in the accompanying prospectus supplement, including
any credit enhancement, participation interests in mortgage loans,
installment contracts for the sale of mortgaged properties or mortgage
pass-through certificates.
[**Mobile home parks will represent security for a material concentration of the
mortgage loans comprising each trust fund, based on principal balances at the
time each series of certificates is issued.**]
40
<PAGE>
Version 8: Mobile Home Parks
[The following is to be inserted in the Prospectus immediately
following "Risk Factors -- Commercial and multifamily mortgage loans are subject
to special risks which may affect your investment":]
RISKS PARTICULAR TO In addition to risks generally associated with real
MOBILE HOME PARKS estate, the successful operation of a mortgaged property
operated as a mobile home park will generally depend
upon 1) the number of competing parks in the local
market, 2) its age, 3) its appearance, 4) its
reputation, 5) the ability of management to provide
adequate maintenance and insurance and 6) the types of
facilities and services it provides.
Mobile home parks also compete against alternative forms
of residential housing, including 1) multifamily rental
properties, 2) cooperatively-owned apartment buildings,
3) condominium complexes and 4) single-family
residential developments.
Mobile home parks are "special purpose" properties that
cannot be readily converted to general residential,
retail or office use. Thus, if the operation of a mobile
home park becomes unprofitable due to competition, age
of the improvements or other factors such that the
borrower becomes unable to meet its obligations on the
related mortgage loan, the liquidation value of the park
may be substantially less, relative to the amount owing
on such mortgage loan, than would be the case if the
park were readily adaptable to other uses.
41
<PAGE>
Version 8: Mobile Home Parks
[The following is to be inserted in the Prospectus immediately
following "The Mortgage Pools --General":]
MORTGAGE LOANS SECURED BY MOBILE HOME PARKS.
Mobile home parks consist of land that is divided into "spaces" or
"homesites" that are primarily leased to mobile home owners. Accordingly, the
related mortgage loans will be secured by mortgage liens on the real estate (or
a leasehold interest therein) upon which the mobile homes are situated, but not
the mobile homes themselves. The mobile home owner often invests in
site-specific improvements such as carports, steps, fencing, skirts around the
base of the mobile home, and landscaping. The park owner typically provides
private roads within the park, common facilities and, in many cases, utilities.
Park amenities may include 1) driveways, 2) visitor parking, 3) recreational
vehicle and pleasure boat storage, 4) laundry facilities, 5) community rooms, 6)
swimming pools, 7) tennis courts, 8) security systems and 9) healthclubs. Due to
relocation costs and, in some cases, demand for mobile home spaces, the value of
a mobile home in place in a park is generally higher, and can be significantly
higher, than the value of the same unit not placed in a park. As a result, a
well-operated mobile home park that has achieved stabilized occupancy is
typically able to maintain occupancy at or near that level. For the same reason,
a lender that provided financing for the mobile home of a tenant who defaulted
in his or her space rent generally has an incentive to keep rental payments
current until the mobile home can be resold in place, rather than to allow the
unit to be removed from the park.
Mortgage loans secured by liens on mobile home parks are affected by
factors not associated with loans secured by liens on other types of
income-producing real estate. The successful operation of such types of
properties will generally depend upon 1) the number of competing parks, 2) its
age, 3) its appearance, 4) its reputation, 5) the ability of management to
provide adequate maintenance and insurance, 6) and the types of facilities and
services it provides.
Mobile home parks also compete against alternative forms of residential
housing, including 1) multifamily rental properties, 2) cooperatively-owned
apartment buildings, 3) condominium complexes and 4) single-family residential
developments. Mobile home parks are "special purpose" properties that cannot be
readily converted to general residential, retail or office use. Thus, if the
operation of a mobile home park becomes unprofitable due to competition, age of
the improvements or other factors such that the borrower becomes unable to meet
its obligations on the related mortgage loan, the liquidation value of the park
may be substantially less, relative to the amount owing on the mortgage loan,
than would be the case if the park were readily adaptable to other uses.
Certain states regulate the relationship of a mobile home park 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. Mobile home park 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 mobile home owner's tenancy or increase its rent or prohibit a
landlord from terminating a tenancy solely by reason of the sale of the owner's
mobile home. Certain states also 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.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on mobile home parks.
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 provide for decontrol
of rental rates upon vacancy of individual units or permit such decontrol only
in the relatively rare event that the mobile home is removed from the homesite.
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.
42
<PAGE>
Version 8: Mobile Home Parks
[The following is to be inserted in the Prospectus Supplement
immediately following "Risk Factors--Book-Entry Registration":]
RISKS PARTICULAR TO ______ of the mortgage loans, which represent _____% of
MOBILE HOME PARKS the initial pool balance, are secured by mortgages on
fee and/or leasehold interests in mobile home parks.
Mortgage loans that are secured by liens on such types
of properties are exposed to certain unique risks. For
more detailed information, you should refer to the
sections in the accompanying prospectus titled "Risks
particular to mobile home parks" and "Mortgage Loans
Secured by Mobile Home Parks."
43
<PAGE>
The information contained herein is not complete and may be changed. This
prospectus supplement is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED _____________, 1999
PROSPECTUS SUPPLEMENT
(To Prospectus dated ________________)
$ (Approximate)
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Depositor
[_______________]
Mortgage Loan Sellers
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES _______
<TABLE>
<CAPTION>
===================================================================================================================================
The trust fund will issue the First Scheduled Final Scheduled
following securities:` Principal Interest Interest Interest Principal Distribution
Amount Rate Period Payment Date Payment Date Date
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 Certificates(1)........
- -----------------------------------------------------------------------------------------------------------------------------------
Class A-2 Certificates(1)........
- -----------------------------------------------------------------------------------------------------------------------------------
Class B Certificates(1)..........
- -----------------------------------------------------------------------------------------------------------------------------------
Class C Certificates (1).........
- -----------------------------------------------------------------------------------------------------------------------------------
Class D Certificates (1).........
- -----------------------------------------------------------------------------------------------------------------------------------
Class E Certificates (1).........
===================================================================================================================================
</TABLE>
(1) The Class B Certificates, Class C Certificates, Class D Certificates and
Class E Certificates are subordinated to the Class A-1 Certificates and the
Class A-2 Certificates.
The terms of the Offering are as follows:
<TABLE>
<CAPTION>
===================================================================================================================================
Initial Public Offering Underwriting Discount Proceeds To Depositor(2)
Price(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Certificate........ $_____________ _______% $_____________
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class A-2 Certificate........ $_____________ _______% $_____________
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class B Certificate.......... $_____________ _______% $_____________
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class C Certificate.......... $_____________ _______% $_____________
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class D Certificate.......... $_____________ _______% $_____________
- -----------------------------------------------------------------------------------------------------------------------------------
Per Class E Certificate.......... $_____________ _______% $_____________
- -----------------------------------------------------------------------------------------------------------------------------------
Total................................ $_____________ _______% $_____________
===================================================================================================================================
</TABLE>
(1) Plus accrued interest from ____________, 1999.
(2) Before deducting expenses payable by Prudential Securities Secured Financing
Corporation, as the depositor, estimated to be $___________.
YOU SHOULD REVIEW CAREFULLY THE FACTORS SET FORTH UNDER "RISK FACTORS"
COMMENCING ON PAGE S-15 OF THIS PROSPECTUS SUPPLEMENT AND PAGE 10 IN THE
ACCOMPANYING PROSPECTUS.
This prospectus supplement does not contain complete information about
the offering of the certificates. You are urged to read both this prospectus
supplement and the prospectus in full. Sales of the certificates may not be
consummated unless you have received both this prospectus supplement and the
attached prospectus. If any statements in this prospectus supplement conflict
with statements in the prospectus, the statements in this prospectus supplement
will control.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE CERTIFICATES OR DETERMINED THAT THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The certificates are asset backed securities issued by the trust. The
certificates are not obligations of Prudential Securities Secured Financing
Corporation or any of its affiliates. Unless otherwise specified in this
prospectus supplement, neither the certificates nor the underlying assets are
insured or guaranteed by any governmental agency.
PRUDENTIAL SECURITIES
[Other Underwriters]
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS _________,____.
- -------------------------------------------------------------------------------
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the certificates is provided in two separate
documents that progressively provide more detail: (a) the accompanying
prospectus, which provides general information, some of which may not apply to a
particular class of certificates, including your class; and (b) this prospectus
supplement, which describes the specific terms of your class of certificates.
IF THE TERMS OF YOUR CERTIFICATES VARY BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
Cross-references are included in this supplement and in the prospectus
which direct you to more detailed descriptions of a particular topic. You can
also find references to key topics in the Table of Contents on page ii and the
Table of Contents in the prospectus on page 2.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission " a
registration statement (including the prospectus and this prospectus
supplement). The prospectus and this prospectus supplement do not contain all of
the information contained in the registration statement. For further information
regarding the documents referred to in the prospectus and this prospectus
supplement, you should refer to the registration statement and the exhibits to
the registration statement. The registration statement and the exhibits can be
inspected and copied at the Public Reference Room of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 and the SEC's regional offices at Seven
World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1500, Chicago, Illinois 60661. Copies of these
materials can be obtained at prescribed rates from the Public Reference Section
of the SEC at 450 Fifth Street, N.W., Washington D.C. 20549. In addition, the
SEC maintains a public access site on the Internet through the World Wide Web at
which site reports, information statements and other information, including all
electronic filings, may be viewed. The Internet address of such World Wide Web
site is http://www.sec.gov.
The SEC allows us to "incorporate by reference" information that the
Depositor files with it, which means that the Depositor can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of the prospectus and this
prospectus supplement. Information that the Depositor files later with the SEC
will automatically update the information in the prospectus and this prospectus
supplement. In all cases, you should rely on the later information over
different information included in the prospectus or this prospectus supplement.
The Depositor incorporates by reference any future annual, monthly and special
reports and proxy materials filed with respect to any trust fund until we
terminate offering the Certificates. The Depositor has determined that its
financial statements are not material to the offering of any of the
Certificates. See "Financial Information." As a recipient of this prospectus,
you may request a copy of any document the Depositor incorporates by reference,
except exhibits to the documents (unless the exhibits are specifically
incorporated by reference), at no cost, by writing or calling: Prudential
Securities Secured Financing Corporation, One New York Plaza, New York, New York
10292, attention: David Rodgers, (212) 214-1000.
You can find a listing of the pages where capitalized terms used in this
supplement are defined under the caption "Index of Terms" beginning on page S-92
in this prospectus supplement and under the caption "Index of Terms" beginning
on page 85 in the prospectus.
---------------------------------------
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 A PROSPECTUS SUPPLEMENT AND A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS ACTING AS
UNDERWRITERS TO DELIVER A PROSPECTUS SUPPLEMENT AND A PROSPECTUS WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS AND SUBSCRIPTIONS.
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
---------------------
Important Notice about Information Presented in this Prospectus
Supplement and the Accompanying Prospectus...............................
Where You Can Find More Information........................................
Summary....................................................................
Risk Factors...............................................................
Description of the Mortgage Pool...........................................
Prudential Securities Financing Corporation................................
Prudential Securities Credit Corp..........................................
Mortgage Loan Sellers......................................................
Description of the Certificates............................................
Yield and Maturity Considerations..........................................
Master Servicer and Special Servicer.......................................
The Pooling and Servicing Agreement........................................
Material Federal Income Tax Consequences...................................
ERISA Considerations.......................................................
Legal Investment...........................................................
Plan of Distribution.......................................................
Use of Proceeds............................................................
Legal Matters..............................................................
Ratings....................................................................
Index of Significant Definitions...........................................
Annex A--Mortgage Loan Characteristics
Annex B--Additional Loan Characteristics
Annex C--Affiliated Borrowers
Prospectus
----------
Important Notice about Information Presented in this Prospectus and the
Accompanying Prospectus Supplement.......................................
Where You Can Find More Information........................................
Incorporation of Certain Information by Reference Reports..................
Summary of Prospectus......................................................
Risk Factors...............................................................
The Depositor..............................................................
Use of Proceeds............................................................
Description of the Certificates............................................
The Mortgage Pools.........................................................
Servicing of the Mortgage Loans............................................
Credit Enhancement.........................................................
Certain Legal Aspects of the Mortgage Loans................................
Material Federal Income Tax Consequences...................................
State and Other Tax Considerations.........................................
ERISA Considerations.......................................................
Legal Investment...........................................................
Plan of Distribution.......................................................
Legal Matters..............................................................
Financial Information......................................................
Rating.....................................................................
Index of Significant Definitions...........................................
ii
<PAGE>
SUMMARY
The following summary is a short description of the main terms of the
offering of the securities. For that reason, this summary does not contain all
of the information that may be important to you. To fully understand the terms
of the offering of the securities, you will need to read both this prospectus
supplement and the attached prospectus, each in its entirety.
OVERVIEW OF THE CERTIFICATES:
The trust fund will issue ___classes of certificates in an aggregate
principal amount equal to $______. ___ of those classes of certificates are
being offered by this prospectus supplement and ___ of those classes of
certificates will be issued separately in a private offering. The trust fund
will rely upon collections from the mortgage loans in the mortgage pool and
funds on deposit in certain accounts to make payments on the certificates.
Neither the depositor, nor the mortgage loan sellers nor any other person or
entity, will be liable for the payments on the certificates.
We are offering only the offered certificates to you with this
prospectus supplement and the accompanying prospectus, and are not offering the
private certificates to you pursuant to this prospectus supplement or the
prospectus. We have included information regarding the private certificates in
this prospectus supplement solely because of its relevance to your understanding
of the offered certificates.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
INITIAL APPROXIMATE
CERTIFICATE APPROXIMATE PERCENTAGE OF
BALANCE OR RATINGS(1) PERCENTAGE OF INITIAL SUBORDINATED
CLASS NOTIONAL AMOUNT [AGENCIES] POOL BALANCE SECURITIES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Offered Certificates
- --------------------------------------------------------------------------------------------------------------------------
Class A-1 ____________
- --------------------------------------------------------------------------------------------------------------------------
Class A-2 ____________
- --------------------------------------------------------------------------------------------------------------------------
Class B ____________
- --------------------------------------------------------------------------------------------------------------------------
Class C ____________
- --------------------------------------------------------------------------------------------------------------------------
Class D ____________
- --------------------------------------------------------------------------------------------------------------------------
Class E ____________
- --------------------------------------------------------------------------------------------------------------------------
Private Certificates (not offered hereby)
- --------------------------------------------------------------------------------------------------------------------------
Class A-EC(2) ____________
- --------------------------------------------------------------------------------------------------------------------------
Class F ____________
- --------------------------------------------------------------------------------------------------------------------------
Class G ____________
- --------------------------------------------------------------------------------------------------------------------------
Class H ____________
- --------------------------------------------------------------------------------------------------------------------------
Class J ____________
- --------------------------------------------------------------------------------------------------------------------------
Class K ____________
- --------------------------------------------------------------------------------------------------------------------------
Class L ____________
- --------------------------------------------------------------------------------------------------------------------------
Class M ____________
- --------------------------------------------------------------------------------------------------------------------------
Class N ____________
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Ratings are by [Agencies]. A security rating is not a recommendation to
buy, sell or hold securities and may be subject to revision or withdrawal at any
time by the assigning rating organization. A security rating does not address
the likelihood or frequency of prepayments (both voluntary and involuntary), the
possibility that you might suffer a lower than expected yield, the likelihood of
receipt of prepayment premiums or yield maintenance charges, any allocation of
prepayment interest shortfalls, or the likelihood of collection by the Master
Servicer of Default Interest.
(2) Interest only strip with notional balance equal to the aggregate of the
certificate balances for Classes A-1 through N.
The Class R Certificates are not represented in this table and are not offered
hereby.
S-1
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
EXPECTED
AMORTIZATION
WEIGHTED AVERAGE PERIOD
CLASS PASS-THROUGH RATE LIFE (YEARS) (1) (MONTH/YEAR) (1)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Offered Certificates
- ----------------------------------------------------------------------------------------------------------------------------
Class A-1 %
- ----------------------------------------------------------------------------------------------------------------------------
Class A-2 %
- ----------------------------------------------------------------------------------------------------------------------------
Class B %
- ----------------------------------------------------------------------------------------------------------------------------
Class C %
- ----------------------------------------------------------------------------------------------------------------------------
Class D %(2)
- ----------------------------------------------------------------------------------------------------------------------------
Class E %(3)
- ----------------------------------------------------------------------------------------------------------------------------
Private Certificates (not offered hereby)
- ----------------------------------------------------------------------------------------------------------------------------
Class A-EC %(4)
- ----------------------------------------------------------------------------------------------------------------------------
Class F %(5)
- ----------------------------------------------------------------------------------------------------------------------------
Class G %(6)
- ----------------------------------------------------------------------------------------------------------------------------
Class H %(7)
- ----------------------------------------------------------------------------------------------------------------------------
Class J %(8)
- ----------------------------------------------------------------------------------------------------------------------------
Class K %(9)
- ----------------------------------------------------------------------------------------------------------------------------
Class L %(10)
- ----------------------------------------------------------------------------------------------------------------------------
Class M %(11)
- ----------------------------------------------------------------------------------------------------------------------------
Class N %(12)
- ----------------------------------------------------------------------------------------------------------------------------
(1) Assumes a prepayment scenario of 0% CPR, with each ARD Loan prepaying in
full on the related Anticipated Repayment Date, and no defaults. See "Yield
and Maturity Considerations--Weighted Average Life" herein.
(2) Initial Pass-Through Rate. The Pass-Through Rate will be a per annum rate
equal to the Weighted Average Net Mortgage Rate less % (the "Class D
Strip" percentage).
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest............................. The trust fund will pay interest on each
class of certificates at rates per annum
specified in the tables above.
Interest will accrue on each class at the
applicable pass-through rate, and will be
calculated based on the outstanding
principal balance of that class on the
last distribution date.
For a more detailed description of the
payment of interest, you should refer to
"_______" in this prospectus supplement.
Principal............................ The trust fund will pay principal on the
certificates sequentially beginning with
the Class A Certificates, and then to
each subsequent class in alphabetical
order. No principal will be paid on the
next class of certificates until the
principal balance of the previous class
of certificates has been reduced to zero.
For a more detailed description of the
payment of principal, you should refer to
"_______" in this prospectus supplement.
S-2
<PAGE>
Early Termination.................... The trust fund may be terminated and
therefor the certificates may be redeemed
early by (1) any holder of Class R-I
Certificates representing more than a 50%
Percentage Interest of the Class R-I
Certificates, (2) the Master Servicer or
(3) the Depositor (in that order), when
the outstanding aggregate scheduled
principal balance of the mortgage loans
is reduced to 1.0% of the initial pool
balance of the mortgage loans
For more detailed information, you should
refer to "Description of the
Certificates-Early Termination" in this
prospectus supplement.
Denominations........................ We will issue the offered certificates in
minimum denominations of $25,000 and
multiples of $1.00 in excess of 25,000.
Book Entry Certificates.............. You will generally hold your interests in
the certificates through The Depository
Trust Company ("DTC"). This is referred
to as book-entry form. As long as the
certificates are held in book-entry form,
you will not receive a separate
certificate representing the
certificates.
For more detailed information, you should
refer to sections in this prospectus
supplement titled "Description of the
Certificates--Delivery, Form and
Denomination," " Risk Factors --
Book-Entry Registration" and "Certain
Information Regarding the Securities --
Book-Entry Registration."
The Trust Fund....................... The depositor will use a portion of the
funds from the issuance and sale of the
securities to purchase the commercial
mortgages from _____ and _____, as
mortgage loan sellers.
The trust fund will use the net proceeds
from the issuance and sale of the
certificates to purchase on the closing
date, the assets that make up the
mortgage pool from Prudential Securities
Secured Funding Corporation, as the
depositor. The assets of the mortgage
pool will consist of fixed rate
commercial mortgage loans that are
secured by first liens on commercial and
multi-family properties. The mortgage
loans will have a total outstanding
principal balance of $___________ as of
______, _____, the cutoff date. The trust
will sell the certificates to investors
for cash to pay for the purchase of the
mortgage loans. [The trust fund may also
pay for a portion of the mortgage loans
with the certificates.] The chart below
represents the flow of funds provided by
investors for the certificates and the
mortgage loans sold by the depositor.
S-3
<PAGE>
[FUNDS FLOW CHART OMITTED]
Property of the Trust Fund........... o the mortgage loans and collections on
the mortgage loans on and after the
cut-off date of __________;
o any mortgaged property that has been
foreclosed upon by master servicer or
the special servicer on behalf of the
trust fund;
o accounts;
o rights to proceeds under certain
insurance policies that cover the
mortgaged properties;
o rights and remedies for any breaches
of representations, warranties and
covenants made by the depositor, the
mortgage sellers, the master servicer
[specify others];
o [specify others]; and
o other rights under the documents
relating to the mortgage loans, the
mortgages and the mortgaged
properties.
The composition of the assets making up
the mortgage pool is described in this
prospectus supplement in the sections
titled "Mortgage Loans and Mortgaged
Properties" and "___".
S-4
<PAGE>
Servicing of the Mortgage Pool....... ________ will act as master servicer and
______ as special servicer for the
mortgage loans in the mortgage pool owned
by the trust fund. The master servicer
and special servicer will handle all
collections, administer defaults and
delinquencies and otherwise service the
contracts. The trust will pay the master
servicer and special servicer a servicing
fee [specify terms].
The master servicer will also be
obligated to advance to the trust fund
interest or principal (including any
balloon payment) on the mortgage loans
that is due but unpaid by the obligors.
The master servicer will also be required
to make certain cash advances to cover
certain unpaid expenses on the mortgaged
properties and to maintain the security
in the mortgaged property. However, if
the master servicer determines that it
will not be able to recover an advance
from an obligor or from the proceeds of
the mortgaged property, the master
servicer may be reimbursed for previously
made advances, plus interest on those
advances, from amounts collected on other
mortgage loans.
Priority of Distributions............ The trust fund will pay the following
amounts on each distribution date in the
following order of priority from
collections on the mortgages during the
prior collection period, amounts advanced
by the master servicer for the
distribution date, and any other amounts
collected by the master servicer and
placed in the collection account:
o trustee fee payable to the trustee
for the trust fund;
o reimbursement of any unreimbursed
advances made by the master servicer,
plus interest on those advances;
o fees payable to the master servicer
and the special servicer for
servicing the mortgage loans; and
o the chart below describes the manner
in which the rights of various
classes will be senior to the rights
of other classes. Entitlement to
receive principal and interest on any
distribution date is depicted in
descending order. The manner in which
mortgage loan losses are allocated is
depicted in ascending order.
S-5
<PAGE>
--------------------
Class A-1, Class A-2
--------------------
|
--------------------
Class B
--------------------
|
--------------------
Class C
--------------------
|
--------------------
Class D
--------------------
|
--------------------
Class E
--------------------
|
--------------------
Class F
--------------------
|
--------------------
Class G
--------------------
|
--------------------
Class H
--------------------
|
--------------------
Class I
--------------------
|
--------------------
Class J
--------------------
|
--------------------
Class K
--------------------
|
--------------------
Class L
--------------------
|
--------------------
Class M
--------------------
|
--------------------
Class N
--------------------
S-6
<PAGE>
Credit Enhancement................... The pooling and servicing agreement
includes certain features designed to
provide protection against losses and
delays in distributions to the Class A
Certificateholders, and to a lesser
extent, the Class B Certificateholders
[and the other certificateholders to an
increasingly lesser extent]. These
features are referred to as "credit
enhancement." Losses on the mortgage
loans or other shortfalls of cash flow
will be covered by [payments by _____
[or] withdrawing amounts on deposit in
the reserve fund and by] allocating
available cash flow in some cases to the
more senior classes of certificates (for
example, to the Class A Certificates
before the B Certificates, to the Class B
Certificates before the Class C
Certificates, and so forth) before making
allocations to subordinate classes. This
reallocation is referred to as
"subordination."
The credit enhancement for the
certificates will be as follows:
[specify features]
RELEVANT PARTIES:
Depositor............................ Prudential Securities Secured Financing
Corporation
One New York Plaza
New York, New York 10292
(212) 214-1000
Master Servicer...................... [Name]
[Address]
[Phone Number]
Special Servicer..................... [Name]
[Address]
[Phone Number]
Trustee.............................. [Name]
[Address]
[Phone Number]
Mortgage Loan Sellers................ The mortgage loans will be purchased from
_____________ and __________.
RELEVANT DATES AND PERIODS:
Cut-off Date......................... _____________.
Closing Date......................... On or about _____________.
Distribution Date.................... Payments on the certificates will be made
on each distribution date which will be
the ____ day of each month, or if that
day is not a business day, the next
succeeding business day. The first
distribution date will be _____________.
A "business day" is any day other than a
Saturday, Sunday or a day on which
banking institutions in the States of
S-7
<PAGE>
New York, ____________ or ____________
are authorized or obligated by law,
executive order or governmental decree to
close.
We expect that the scheduled final
distribution dates for the payment of
principal of the certificates will be as
set forth below. The dates are calculated
assuming that there are no defaults,
delinquencies or modifications of the
mortgage loans after ______________.
CLASS SCHEDULED FINAL
----- DISTRIBUTION DATE
-----------------
Class A-1
Class A-2
Class B
Class C
Class D
Class E
Record Date.......................... The record date for payments on the
certificates is the close of business on
the last business day of each month. The
record date always relates to the
distribution date for the following
calendar month.
Interest Accrual Period.............. Interest on the certificates will be
payable on each Distribution Date, based
on the interest accrual period that will
be the calendar month before the month in
which the distribution date occurs.
Interest for each interest accrual period
will be calculated based on a 360-day
year consisting of twelve 30-day months.
Collection Period.................... Payments on the certificates on each
distribution date will be based on the
collections on the mortgage loans in the
mortgage pool during the preceding
collection period. The collection period
is the period beginning on the day after
the determination date in the preceding
month and ending on the determination
date in the month in which the payment is
made. The determination date is the ____
day of each month, or if that day is not
a business day, the next business day.
The collection period for the first
distribution date will begin on the day
after the cut-off date.
Due Date............................. Payments on the mortgage loans in the
mortgage pool are due on the first day of
each month beginning on the first month
on which payments on a particular
mortgage loan are due (disregarding any
applicable grace periods), except that
the due date for payments on Mortgage
Loan, Control # ___ is the __th day of
each month (disregarding any applicable
grace periods). [describe escrow
arrangement for exceptions]
STRUCTURAL FEATURES:
Federal Tax Status................... Elections will be made to treat
designated portions of the Trust Fund as
two separate "real estate mortgage
investment conduits" (each a "REMIC").
The offered certificates will constitute
"regular interests" in a REMIC. The
offered certificates generally will be
treated as newly originated debt
instruments for federal income tax
purposes.
S-8
<PAGE>
This means you will be required to
include in income all interest on our
certificates in accordance with the
accrual method of accounting, regardless
of your usual method of accounting. [None
of the offered certificates is expected
to be treated for federal income tax
reporting purposes as having been issued
with an original issue discount.] We
anticipate that the offered certificates
may be treated for federal income tax
purposes as having been issued at a
premium.
If you are a mutual savings bank or
domestic building and loan association,
the offered certificates held by you will
represent interests in "qualifying real
property loans" within the meaning of
Section 593(d) of the Internal Revenue
Code of 1986 (the "Tax Code"). If you are
a real estate investment trust, the
offered certificates held by you will
constitute "real estate assets" within
the meaning of Section 856(c)(5)(B) of
the Tax Code, and income with respect to
offered certificates will be considered
"interest on obligations secured by
mortgages on real property or on
interests in property" within the meaning
of Section 856(c)(3)(B) of the Tax Code.
If you are a domestic building and loan
association, the offered certificates
held by you will generally constitute a
"regular or residual interest in a REMIC"
within the meaning of Section
7701(a)(19)(C)(xi) of the Tax Code only
to the extent that the Mortgage Loans are
secured by multifamily apartment
buildings. The Class R-I and Class R-II
Certificates will constitute "residual
interest in a REMIC" within the meaning
of Section 7701(a)(19)(C)(xi) of the Tax
Code to the same extent.
For additional information concerning the
application of United States federal
income tax laws to the trust fund and the
certificates, you should refer to the
section in the prospectus titled
"Material Federal Income Tax
Consequences."
ERISA................................ The Class A Certificates are generally
eligible for purchase by employee benefit
plans, subject to certain considerations
discussed in the sections in this
prospectus supplement and the prospectus
titled "ERISA Considerations."
The other classes of offered
certificates, however, may not be
acquired by any employee benefit plan or
an individual retirement plan. [However,
under limited circumstances, Class __
Certificates may be purchased as limited
investments by persons using insurance
company general accounts or separate
accounts.]
You should refer to sections in this
prospectus supplement and the prospectus
titled "ERISA Considerations." If you are
a benefit plan fiduciary considering
purchase of the certificates of any class
you should, among other things, consult
with your counsel to determine whether
all required conditions have been
satisfied.
SMMEA................................ The Class A-1, Class A-2 and Class B
Certificates will be mortgage-related
securities pursuant to the Secondary
Mortgage Market Enhancement Act of 1984.
For more information, you should refer to
sections in the prospectus supplement and
the prospectus titled "Legal Investment."
S-9
<PAGE>
THE MORTGAGE LOANS AND MORTGAGED PROPERTIES:
The Mortgage Pool.................... The assets of the trust fund will
primarily consist of the mortgage loans.
Each mortgage loan constitutes the
obligation of one or more persons to
repay a specified sum with interest. Each
mortgage loan [(other than Mortgage Loan
Control #____, which is secured by a
second lien)], will be secured by a first
lien on a commercial or multifamily
residential property.
The composition of the mortgage loans in
the mortgage pool as of _________, the
cut-off date are summarized below. For
more detailed information, you should
refer to the section in this prospectus
supplement titled "Description of the
Mortgage Pool" and to the Annex A
attached to this prospectus supplement.
GENERAL MORTGAGE LOAN CHARACTERISTICS
(AS OF THE CUT-OFF DATE)
INITIAL POOL BALANCE(1)
NUMBER OF MORTGAGE LOANS
AVERAGE LOAN BALANCE
MAXIMUM OF MORTGAGE
BALANCES MINIMUM OF
MORTGAGE BALANCES WEIGHTED
AVERAGE MORTGAGE RATE
(GROSS)
WEIGHTED AVERAGE MORTGAGE RATE (NET)
AMORTIZED WEIGHTED AVERAGE MATURITY
(MONTHS)
RANGE OF AMORTIZATION TERMS
WEIGHTED AVERAGE UNDERWRITTEN DSCR
RANGE OF DSCRS
WEIGHTED AVERAGE LTV (CURRENT)
RANGE OF LTVS (CURRENT)
WEIGHTED AVERAGE BALLOON/ARD LTV
PERCENTAGE OF INITIAL POOL
BALANCE MADE UP OF:
FULLY AMORTIZING LOANS
BALLOON LOANS (INCLUDING ARD LOANS)
========================================
(1) The "Initial Pool Balance" is the
aggregate of the cut-off date principal
balances of the mortgage loans, and gives
effect to the deposit into the loan
account for __________, principal amounts
payable on its due date in __________ as
if that payment were made before
____________.
S-10
<PAGE>
DISTRIBUTION OF CUT-OFF DATE PRINCIPAL BALANCES
-----------------------------------------------
PERCENTAGE OF
AGGREGATE
NUMBER OF CURRENT
RANGE OF MORTGAGE PRINCIPAL
CURRENT PRINCIPAL BALANCES LOANS BALANCE
-------------------------- ----- -------
255,509 - 499,999
500,000 - 999,999
1,000,000 - 1,999,999
2,000,000 - 2,999,999
3,000,000 - 3,999,999
4,000,000 - 4,999,999
5,000,000 - 5,999,999
6,000,000 - 6,999,999
7,000,000 - 7,999,999
8,000,000 - 8,999,999
9,000,000 - 9,999,999
10,000,000 - 11,999,999
12,000,000 - 13,999,999
14,000,000 - 16,999,999
17,000,000 OR MORE %
------------------ ----- ----
TOTAL ___ 100%
======================================================
DEBT SERVICE COVERAGE RATIOS
Debt Service Coverage Ratios ("DSCRs") for each
Mortgage Loan are calculated based on the ratio of the
related annual Underwritten Cash Flow to the related
Annual Debt Service, as more fully described in the
section of this prospectus supplement titled
"Description of the Mortgage Pool--Certain
Characteristics of the Mortgage Pool."
S-11
<PAGE>
RANGE OF DEBT SERVICE COVERAGE RATIOS
-------------------------------------
PERCENT OF
NUMBER OF INITIAL
DSCR(X) LOANS POOL BALANCE
------- ----- ------------
TOTAL _____ _______%
======================================================
[(1)This loan is part of a group of
cross-collateralized Mortgage Loans that has an
average DSCR of ____x. See "_________."
S-12
<PAGE>
RANGE OF ORIGINAL LOAN-TO-VALUE RATIOS
--------------------------------------
PERCENT OF
NUMBER OF INITIAL
ORIGINAL LTV LOANS POOL BALANCE
------------ ----- ------------
TOTAL _____ 100.00%
======================================================
PROPERTY TYPES
--------------
NUMBER OF PERCENT OF
MORTGAGED INITIAL
PROPERTY TYPE PROPERTIES POOL BALANCE
------------- ---------- ------------
[ASSISTED LIVING FACILITY
CONGREGATE CARE
HOSPITALITY
INDUSTRIAL
MIXED USE
MOBILE HOME PARK
MULTIFAMILY
NURSING HOME
OFFICE
OFFICE/INDUSTRIAL
RETAIL-ANCHORED
RETAIL-SHADOW ANCHORED
RETAIL-SINGLE TENANT
RETAIL-UNANCHORED
SELF-STORAGE
SPECIAL PURPOSE
WAREHOUSE] ____ _____
TOTAL ____ _____%
======================================================
S-13
<PAGE>
RANGE OF MATURITY YEARS
-----------------------
PERCENT OF
NUMBER OF INITIAL
MATURITY YEAR LOANS POOL BALANCE
------------- ----- ------------
2005
2006
2007
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018 _____ ______
TOTAL _____ 100.00%
======================================================
S-14
<PAGE>
RISK FACTORS
You should carefully consider the following risks and those in the
prospectus under "Risk Factors" before making an investment decision. Your
investment in the offered certificates will involve some degree of risk. If any
of the following risks are realized, your investment could be materially and
adversely affected. In addition, other risks unknown to us or which we currently
consider immaterial may also impair your investment.
RISKS RELATING TO LACK OF Your certificates generally do not
CERTIFICATEHOLDER CONTROL entitle you to vote, except with respect
OVER TRUST FUND to required consents to certain
amendments to the pooling and servicing
agreement and, in certain cases, to
replace parties to the pooling and
servicing agreement. Generally, you have
only very limited right to participate in
decisions with respect to the
administration of the trust fund
(although, among other things, the
controlling class will have the right to
replace the special servicer and the
directing certificateholder will have
certain rights with respect to approving
asset status reports, the conduct of
property appraisals and appraisal
reductions described herein). Such
decisions are generally made, subject to
the express terms of the pooling and
servicing agreement, by the servicer, the
trustee or the special servicer, as
applicable. Any decision made by one of
those parties in respect of the trust
fund, even if made in the best interests
of the certificateholders (as determined
by such party in its good faith and
reasonable judgment), may be contrary to
the decision that would have been made by
the holders of any particular class or
classes of offered certificates and may
negatively affect the interests of such
holders.
RISKS ASSOCIATED WITH THE The transition from the year 1999 to the
YEAR 2000 MAY ADVERSELY AFFECT year 2000 may disrupt the ability of
YOUR INVESTMENT computerized systems to process
information, the collections of payments
on the mortgages loans, and servicing of
the mortgage loans and the performance of
related duties by the master servicer and
the special servicer, if any, the
trustee, the borrowers and other third
parties. The depositor has been advised
by the master servicer and the special
servicer, if any, and the trustee that,
with respect to those computer systems
identified as being mission critical for
the performance of the servicing
functions described herein, they are
committed to either (1) modifying their
respective existing systems to the extent
required to cause them to be Year 2000
capable, or (2) acquiring new and/or
upgraded computer systems that are Year
2000 capable in each case prior to August
31, 1999. The master servicer and the
special servicer, if any, and the trustee
consider their products and services to
be "Year 2000 capable" if the product or
service will be capable of accurately
processing, proving and receiving date
data from, into and between the twentieth
and twenty-first centuries, and will
correctly create, store, process and
output information related to or
including dates on or after December 31,
1999 as a result of the changing of the
date from 1999 to 2000, including leap
year calculations, when used for the
purpose for which it was intended,
assuming that all other products,
including hardware and software, when
used in combination with the product or
service properly exchange date data.
<PAGE>
However, none of the depositor, the
transferor or any affiliate of the
depositor or transferor has made any
independent investigation of the computer
systems of the master servicer, the
special servicer, if any, or the trustee.
If the computer systems of the master
servicer and the Special Servicer, if any
or the trustee are not fully Year 2000
capable, the resulting disruption in the
collection or distribution of receipts on
the mortgage loans could materially
adversely
S-15
<PAGE>
affect the certificateholders.
CERTIFICATEHOLDERS GENERALLY MUST One or more classes of the certificates
EXERCISE RIGHTS THROUGH DTC initially will be represented by
certificates registered in the name of
the nominee for the DTC, and will not be
registered in the names of the
certificateholders or their nominees.
Unless and until definitive certificates
are issued, beneficial owners of the
certificates will be able to exercise the
rights of certificateholders only
indirectly through the DTC and its
participating organizations.
For more detailed information regarding
theses risks, you should refer to
sections in this prospectus supplement
titled "Description of the
Certificates--Delivery, Form and
Denomination" and "Certain Information
Regarding the Securities - Book-Entry
Registration."
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of ______ commercial and multifamily
"whole" mortgage loans (the "Mortgage Loans"). The Mortgage Loans have an
aggregate Cut-off Date Principal Balance of approximately $_____________ (the
"Initial Pool Balance"), subject to a variance of plus or minus 5%. The "Cut-off
Date Principal Balance" of each Mortgage Loan is 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. The "Initial Pool Balance"
is the aggregate of the Cut-off Date Principal Balances of the Mortgage Loans as
of the Cut-off Date, and gives effect to the deposit into the ______ Loan
Account of principal amounts payable on its Due Date in ______________ as if
such payment were made before _____________. The "Pool Balance" as of any date
will be the aggregate of the outstanding principal balances of the Mortgage
Loans in the Mortgage Pool as of such date. The following description of terms
and provisions of the Mortgage Loans is a generalized description of the terms
and provisions of the Mortgage Loans in the aggregate. Many of the individual
Mortgage Loans have special terms and provisions that deviate from this
generalized description.
Generally, each Mortgage Loan is evidenced by a separate promissory
note. Each Mortgage Loan is secured by one or more mortgages, deeds of trust,
deeds to secure debt or other similar security instruments (each, a "Mortgage")
that creates a first lien on one or more of a fee simple estate, an estate for
years or a leasehold estate in a real property (a related "Mortgaged Property")
improved for commercial or multifamily residential use.
The percentage of the Initial Pool Balance represented by each type of
Mortgaged Property is as follows:
Number of Percent of
Mortgaged Initial
Property Type Properties Pool Balance
------------- ---------- ------------
[Assisted Living %
Facility
Congregate Care %
Hospitality %
Industrial %
Mixed Use %
Mobile Home Park %
Multifamily %
Nursing Home %
S-16
<PAGE>
Office %
Office/Industrial %
Retail-Anchored %
Retail-Shadow Anchored %
Retail-Single Tenant %
Retail-Unanchored %
Self-Storage %
Special Purpose %
Warehouse] _____ _____%
Total _____ _____%
========================================================================
No Mortgage Loan is insured or guaranteed by the United States of
America, any governmental agency or instrumentality, any private mortgage
insurer, the Depositor, the Transferor, the Mortgage Loan Sellers, the Master
Servicer, the Special Servicer, the Trustee or any of their respective
affiliates.
The Depositor will purchase the Mortgage Loans on or before the Closing
Date from the Transferor pursuant to a "Mortgage Loan Purchase Agreement" to be
dated on or about ___________. The Transferor will purchase ____ and ____
Mortgage Loans (representing approximately ____% and ____% of the Initial Pool
Balance) from [the related Mortgage Loan Sellers], on or before the Closing Date
pursuant to separate agreements (collectively, the "Underlying Mortgage Loan
Purchase Agreements"). The Depositor will assign the Mortgage Loans, and make
certain representations and warranties regarding the Mortgage Loans, to the
Trustee pursuant to the Pooling and Servicing Agreement. The Master Servicer and
the Special Servicer will each service the Mortgage Loans pursuant to the
Pooling and Servicing Agreement. For more detailed information, you should refer
to the section in this prospectus supplement titled "The Pooling and Servicing
Agreement--Servicing of the Mortgage Loans; Collection of Payments."
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is secured by a Mortgage encumbering the related
Mortgaged Property. of the Mortgage Loans, representing approximately %
of the Initial Pool Balance provide for full or limited recourse against the
related borrower, or a guarantor or guarantors. The remainder of the Mortgage
Loans are non-recourse loans, meaning that if a borrower defaults thereunder,
recourse generally may be had only against the specific Mortgaged Property
securing such Mortgage Loan and any other assets specifically pledged by the
borrower to secure such Mortgage Loan. For example, 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 Property. Also, each
Mortgage Loan provides for the indemnification of the mortgagee by the related
borrower for the presence of any hazardous substances affecting the Mortgaged
Property. In certain instances, additional collateral may exist. However,
borrowers generally have limited assets, and there can be no assurance that any
borrower will have sufficient assets to support any such indemnification
obligations that may arise. For more detailed information, you should refer to
the section in this prospectus supplement titled "Risk Factors--Environmental
Law Considerations."
Except as described above under the section titled "--General", each
Mortgage constitutes a first lien on a Mortgaged Property. Generally such lien
is subject only to (1) liens for real estate and other taxes and special
assessments, (2) covenants, conditions, restrictions, rights of way, easements
and other encumbrances in effect as of the date of recording of such Mortgage,
and (3) exceptions and encumbrances on the Mortgaged Property reflected in the
related title insurance policy.
Ground Leases; Estates for Years. _____ of the Mortgage Loans,
representing approximately ______% of the Initial Pool Balance, are secured by a
first lien encumbering the related borrower's leasehold interest in the related
property. _____ of the Mortgage Loans, representing approximately ______% of the
Initial Pool Balance, are secured by first liens encumbering the related
borrower's leasehold interest in the related Mortgaged Property, together with
the fee owner's interest in such real property. ____ of the Mortgage Loans,
representing approximately _____% of the Initial Pool Balance, are secured by
first liens encumbering the related borrower's (1) fee interest in a portion of
the Mortgaged Property and (2) leasehold interest in the
S-17
<PAGE>
remainder of the Mortgaged Property. The Mortgage Loan Sellers have represented
that each ground lease expires not less than 10 years after the maturity date of
the related Mortgage Loan (including extension options). For more detailed
information, you should refer to the section in this prospectus supplement
titled "Certain Legal Aspects of the Mortgage Loans--Foreclosure-Leasehold
Risks."
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. The Mortgage Loans provide for Monthly Payments to be due on
the first day of each month (each, a "Due Date"), except _____ of the Mortgage
Loans, representing approximately ____% of the Initial Pool Balance, provide for
Monthly Payments to be due on the 10th day of each month. With respect to
Mortgage Loan Control #____, an account (the "Loan ____ Account") will be
established and funded with an amount equal to one scheduled payment thereof.
The amount so deposited will be advanced each month to the Trust and then
reimbursed on the related Due Date from Collections in respect of such Mortgage
Loans, so that no shortfall in collections will result from the related Due Date
occurring on the 10th of each month. All of the Mortgage Loans provide for a
grace period of ten days or less from the related Due Date before a scheduled
payment is deemed to be contractually delinquent for purposes of imposing a late
charge.
Mortgage Rates; Calculations of Interest. Each Mortgage Loan accrues
interest at an annualized rate (a "Mortgage Rate") that is fixed for the entire
term of such Mortgage Loan and does not permit any negative amortization or the
deferral of interest except that ____ of the Mortgage Loans, representing
approximately _____% of the Initial Pool Balance, provide that for a period of
up to ____ years from origination the borrower is obligated only to pay interest
accrued each month. Four of such Mortgage Loans, representing approximately
% of the Initial Pool Balance, have not yet reached the end of such period.
These Mortgage Loans are identified in Annexes A and B, together with a summary
of the relevant provisions.
ARD Loans; Excess Interest. of the Mortgage Loans (the "ARD Loans"),
representing approximately % of the Initial Pool Balance, bear interest at
their respective Mortgage Rates until an "Anticipated Repayment Date" specified
therein. Commencing on such Anticipated Repayment Date, each such Mortgage Loan
will bear interest at a fixed annual rate (the "Revised Rate") equal to the
Mortgage Rate plus a specified percentage (generally, no more than __%, so long
as the Mortgage Loan is included in the Trust Fund). Until the principal
balance of 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 related Revised Rate over the interest that would have accrued at the
related Mortgage Rate will be deferred. Such deferred interest will not be
added to the principal balance of the related Mortgage Loan, but will itself
accrue interest at the Revised Rate to the extent such accrual is lawful. Such
accrued and deferred interest, and any interest accrued thereon, is referred to
herein as "Excess Interest."
Borrowers under ARD Loans generally are required to enter into lockbox
agreements whereby revenue from the related Mortgage Property will be deposited
into a lockbox account controlled by the Master Servicer, if certain conditions
are met, rather then directly to the borrower. From and after the Anticipated
Repayment Date, 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:
(1) required payments to the tax and insurance escrow fund and any
ground lease escrow fund;
(2) payment of monthly debt service;
(3) payments to any other required escrow funds;
(4) payment of operating expenses pursuant to the terms of an annual
budget approved by the Master Servicer;
(5) payment of approved extraordinary operating expenses or capital
expenses not set forth in the approved annual budget or allotted
for in any escrow fund;
(6) principal on the Mortgage Loan until such principal is paid in
full; and
(7) Excess Interest.
S-18
<PAGE>
The cash flow from the Mortgaged Property securing an ARD Loan after payments of
items (1) through (5) 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. However, upon the commencement of such
period, the borrower may prepay the loan, in whole or in part, without payment
of a Prepayment Premium or Yield Maintenance Charge. The Anticipated Repayment
Date for each ARD Loan is listed in Annex A.
The Class N Certificates will be entitled to all distributions of
Excess Interest, subject to the limitations set forth in the Pooling and
Servicing Agreement, including on Distribution Dates on or after that on which
the Class Certificate Balance thereof is reduced to zero. Additionally, the
holders of 100% of the Class N Certificates or the Special Servicer will have
the option to purchase any ARD Loan on or after its Anticipated Repayment Date
at a price equal to its outstanding Scheduled Principal Balance plus accrued and
unpaid interest and unreimbursed Advances made with respect thereto (with
interest thereon). As a condition to such purchase, each such holder will be
required to deliver an opinion of counsel to the effect that such purchase (or
such right to purchase) would not cause either REMIC to fail to qualify as a
REMIC under the Tax Code and either (1) an opinion of counsel to the effect that
such purchase would not result in a gain taxable as net income from prohibited
transactions (imposed by Tax Code Section 860F(a)(1)) or result in the
imposition of any other tax on either REMIC or (2) an accountant's certification
to the effect that such purchase would not result in the realization of any net
income to either REMIC.
Amortization of Principal. ____ of the Mortgage Loans (the "Balloon
Loans"), representing approximately ____% of the Initial Pool Balance, provide
for monthly payments of principal based on amortization schedules longer than
their remaining terms, thereby leaving substantial principal amounts due and
payable on their respective maturity dates. Such final payment, together with
interest for the one-month period preceding such Balloon Loan's maturity date,
is referred to herein as a "Balloon Payment". The remaining Mortgage Loans have
amortization terms that match their respective terms to maturity. The weighted
average Balloon LTV applicable to the Mortgage Pool is approximately ____%.
Prepayment Provisions. ____ of the Mortgage Loans, representing
approximately _____% of the Initial Pool Balance, provide there are no
restrictions on voluntary prepayments during a specified period (generally [two]
to [twelve] months) prior to the maturity date or Anticipated Repayment Date, as
applicable, of such Mortgage Loans. Prior to such specified period, if any, each
Mortgage Loan restricts voluntary prepayments in one or more of the following
ways:
(1) Imposing a "Lockout Period" by prohibiting any prepayments for a
specified period of time after the date of origination of such
Mortgage Loan;
(2) Imposing a "Yield Maintenance Charge" (as described below) in
connection with any principal prepayment made during a specified
period of time (a "Yield Maintenance Period") after the date of
origination of such Mortgage Loan or after a Lockout Period; or
(3) Imposing "Prepayment Premiums" (fees or premiums generally equal
to a fixed percentage of the then outstanding principal balance of
such Mortgage Loan) in connection with any principal prepayment
made during a specified period of time (a "Prepayment Premium
Period") after any Lockout Period and any Yield Maintenance
Period.
_________ of the Mortgage Loans that allow prepayment with either a
Prepayment Premium or Yield Maintenance Charge, representing % of the Initial
Pool Balance, also give the related borrower the option either to defease the
Mortgage Loan (as described below) or to prepay the Mortgage Loan either with
payment of an accompanying Yield Maintenance Charge or Prepayment Premium.
The Mortgage Loans generally require prepayments to be accompanied by a
full month's interest, regardless of the date on which they are made.
Generally, any "Yield Maintenance Charge" will be the greater of (1) a
specified Prepayment Premium or (2) the present value, as of the date of such
prepayment, of the remaining scheduled payments of principal and interest on the
portion of the Mortgage Loan being prepaid (including any Balloon Payment or
principal balance due on the Anticipated Repayment Date
S-19
<PAGE>
for an ARD Loan) determined by discounting such payments at the Yield Rate, less
the amount prepaid. The "Yield Rate" generally is a per annum rate calculated by
the linear interpolation of the yields of U.S. Treasury constant maturities with
maturity dates (one longer, one shorter) most nearly approximating the maturity
date (or, with respect to ARD Loans, the Anticipated Repayment Date) of the
Mortgage Loan being prepaid, 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 prepayment, or the monthly equivalent of such rate. If Federal Reserve
Statistical Release H.15--Selected Interest Rates is no longer published, the
Master Servicer shall select a comparable publication to determine the relevant
Yield Rate. [With respect to Mortgage Loan Control #___, representing ____% of
the Initial Pool Balance, the Yield Rate is a per annum rate calculated as
described above plus a spread.]
The table in "Summary--Collateral Overview; Loan Details--Prepayment
Lockout/Premium Analysis" 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:
(1) a Lockout Period is in effect;
(2) a prepayment must be accompanied by (a) a Yield Maintenance
Charge, (b) a prepayment penalty equal to the greater of a Yield
Maintenance Charge or a Prepayment Premium (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
(3) no Lockout Period, Yield Maintenance Period or Prepayment Premium
Period is applicable (designated "Open" on such table).
Annex A attached hereto contains information regarding the Prepayment Premiums
applicable to each of the Mortgage Loans.
Prepayment Premiums and Yield Maintenance Charges are generally not
imposed in connection with involuntary prepayments resulting from a Casualty or
Condemnation, so long as no event of default then exists. The Prepayment
Premiums and Yield Maintenance Charges are payable in connection with
prepayments after an event of default but prior to the sale of the Mortgaged
Property. Certain Mortgage Loans permit the related borrower to transfer the
related Mortgaged Property to a third party without prepaying the related
Mortgage Loan if certain conditions are satisfied, including an assumption by
the transferee of all of such borrower's obligations in respect of such Mortgage
Loan. For more detailed information, you should refer to the section in this
prospectus supplement titled "--`Due-on-Encumbrance' and `Due-on-Sale'
Provisions."
You should note that the enforceability of provisions requiring payment
of Prepayment Premiums and Yield Maintenance Charges has been challenged in some
states, and that the collectability of any Prepayment Premium depends on the
creditworthiness of the borrower. For more detailed information, you should
refer to the section in this prospectus supplement titled "Certain Yield and
Prepayment Considerations" and to the section in the prospectus titled "Certain
Legal Aspects of the Mortgage Loans--Enforceability of Certain Provisions."
Defeasance. ______ of the Mortgage Loans, representing approximately
_____% of the Initial Pool Balance, grant the related borrower the right, after
a specified period, to obtain the release of the lien of the related Mortgage on
the related Mortgaged Property by substituting for such Mortgaged Property,
direct, non-callable obligations of the United States of America. Such
securities must, in the aggregate, provide for payments on or prior to each Due
Date and on the maturity date of the Mortgage Loan in amounts equal to or
greater than the amounts payable under the related promissory note on each such
date (or, in the case of the ARD Loans, through the related Anticipated
Repayment Dates, including prepayment in full on the related Anticipated
Repayment Dates). Conditions to the related borrower's right to a defeasance
include delivery of (1) an opinion of counsel stating that the Trust REMICs will
not fail to maintain their respective statuses as REMICs as a result of such
defeasance and (2) in some cases, written confirmation from the Rating Agencies
that such defeasance will not result in a downgrading, withdrawal or
qualification of the respective ratings of any outstanding classes of
Certificates. [ of the Mortgage Loans, representing approximately % of
the Initial Pool Balance, afford the related borrower the option either to
prepay (with an accompanying Yield Maintenance Charge) or to exercise the
defeasance feature.]
S-20
<PAGE>
"Due-on-Encumbrance" and "Due-on-Sale" Provisions. The Mortgages
generally contain "due-on-encumbrance" clauses that permit the holder of the
Mortgage to accelerate the maturity of the related Mortgage Loan if the borrower
encumbers the related Mortgaged Property without its consent. Certain borrowers
are allowed, under certain circumstances, to further encumber the related
Mortgaged Property with additional liens. For more detailed information, you
should refer to the section in the prospectus titled "Risk Factors--Risks
Associated With Other Financing." The Master Servicer or the Special Servicer,
as applicable, will determine, in a manner consistent with the Servicing
Standard described in the section in this prospectus supplement titled "The
Pooling and Servicing Agreement--Servicing of the Mortgage Loans; Collection of
Payments" whether to accelerate payment of a Mortgage Loan upon, or to consent
to, any additional encumbrance of the related Mortgaged Property. In certain
cases, acceleration may not be waived except upon confirmation from each Rating
Agency that such waiver will not result in the downgrade, withdrawal or
qualification of its then current rating of any Class of Certificates.
The Mortgages generally prohibit the borrower from transferring the
Mortgaged Property, or allowing a change of ownership of the borrower, without
the mortgagee's prior consent. For this purpose, a change in ownership of the
borrower is generally defined to include:
(1) a specified percentage (generally from 10% to 49%) change in the
ownership of the borrower, a guarantor of the Mortgage Loan, or
the general partner or managing member of the borrower;
(2) the removal, resignation or change in ownership of, or the
transfer or pledge of the partnership or membership interest of,
any general partner or managing member of a borrower or a
guarantor of the Mortgage Loan;
(3) with respect to certain of such Mortgage Loans, the removal,
resignation or change in ownership of the managing agent of the
related Mortgaged Property; or
(4) the voluntary or involuntary transfer or dilution of the
controlling interest in the related borrower held by a specified
person.
With respect to certain of such Mortgage Loans, the borrower may be entitled to
transfer the Mortgaged Property or allow a change in ownership if certain
conditions are satisfied, typically including one or more of the following:
(1) no event of default has occurred;
(2) the proposed transferee meets the mortgagee's customary
underwriting criteria;
(3) the Mortgaged Property continues to meet the mortgagee's customary
underwriting criteria;
(4) an acceptable assumption agreement is executed; and
(5) a specified assumption fee (generally between 0.5% and 1.0% of the
then outstanding principal balance of the related Mortgage Loan)
has been received by the mortgagee.
Certain of the Mortgages also allow: (1) changes in ownership between
existing partners and members; (2) transfers to family members (or trusts for
the benefit of family members), affiliated companies and certain specified
individuals and entities; (3) issuance by the borrower of new partnership or
membership interests; (4) certain other changes in ownership for estate planning
purpose; or (5) certain other transfers similar in nature to the foregoing.
In the event of any transfer or change in ownership of the Mortgaged
Property which is in direct violation of provisions contained in the Mortgage
Loan Documents, such documents generally permit the holder of the Mortgage Loan
to accelerate the loan's maturity. For more detailed information, you should
refer to the section in the prospectus titled "Certain Legal Aspects of the
Mortgage Loans--Enforceability of Certain Provisions--Due-on-Sale Provisions."
You should note that the enforceability of due-on-sale and due-on-encumbrance
provisions has been challenged in several states.
Default Provisions. The related Mortgage Loan Documents generally
provide that an event of default will exist if:
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<PAGE>
(1) the borrower fails to pay any regular installment of principal
and/or interest (a) upon the date the same is due, (b) within a
specified period (generally five days to 10 days) after the date
upon which the same was due, or (c) within a specified period
(generally five days to 10 days) following written notice from the
mortgagee of such failure;
(2) the borrower violates prepayment, defeasance, Due-on-Encumbrance
or Due-on-Sale provisions;
(3) the borrower fails to pay taxes or other charges when due, to keep
all required insurance policies in full force and effect, to cure
any material violations of laws or ordinances affecting the
Mortgaged Property or to operate the related Mortgaged Property
according to specified standards;
(4) a mechanic's, materialman's or other lien is imposed against the
Mortgaged Property; or
(5) a bankruptcy, receivership or similar action is instituted against
the borrower or the Mortgaged Property.
Additionally, the related Mortgage Loan Documents may contain other
specified events of default, including one or more of the following:
(1) for multi-family rental properties, the unapproved conversion of
the related Mortgaged Property to a condominium or cooperative;
(2) defaults under certain other agreements;
(3) defaults under or unapproved modifications to any related
franchise agreement;
(4) material changes to or defaults under any related management
agreement; and
(5) for health-care related properties, the failure to correct any
deficiency that would justify termination of a Medicare or
Medicaid contract or a ban on new patients otherwise qualifying
for Medicaid or Medicare coverage or the assessment of certain
fines or penalties by any state or any Medicare, Medicaid, health,
reimbursement or licensing agency.
Upon an event of default, the Master Servicer or the Special Servicer
may take such action as it deems advisable to protect and enforce the rights of
the Trustee, on behalf of the Certificateholders, against the related borrower
and in and to the related Mortgaged Property, subject to the terms of the
related Mortgage Loan. Such action may include acceleration of maturity of the
Mortgage Loan or complete or partial foreclosure of the Mortgage Loan.
Default Interest. All of the Mortgage Loans provide for imposition of a
rate of interest higher than the stated interest rate upon the occurrence of an
event of default ("Default Interest"). Default Interest is generally calculated
as a specified rate above the stated interest rate of such Mortgage Loan, and in
some cases may be calculated as a specified rate above a specified base rate
(typically a prime rate reported in The Wall Street Journal or published by
major money center banks). You should note that the enforceability of Default
Interest provisions has been challenged in several states. Also, the
collectibility of any Default Interest is dependent on the creditworthiness of
the borrower. For more detailed information, you should refer to the section in
the prospectus titled "Certain Legal Aspects of the Mortgage Loans
- --Enforceability of Certain Provisions."
Hazard, Liability and other Insurance. Each Mortgage Loan requires that
the related Mortgaged Property be insured against loss or damage by fire or
other risks and hazards covered by a standard extended coverage insurance
policy. Such insurance generally includes:
(1) commercial general liability insurance for bodily injury or death
and property damage;
(2) an "All Risk of Physical Loss" policy or standard extended
coverage policy;
S-22
<PAGE>
(3) such other coverage as the related Mortgage Loan Seller may
require based on the specific characteristics of the Mortgaged
Property (including in each case other than where a Major Tenant
is self-insured or has independently procured similar insurance,
rental loss insurance and business interruption insurance); and
(4) where appropriate, boiler and machinery coverage and flood
insurance.
Generally, such insurance must be for an amount equal to (1) the full
replacement cost of the Mortgaged Property or (2) the outstanding principal
balance of the related Mortgage Loan, whichever is less but in any event in an
amount sufficient to ensure that the insurer would not deem the borrower a
co-insurer. With respect to some of the Mortgage Loans, the related borrower has
satisfied the applicable insurance requirements by obtaining blanket insurance
policies.
The related Mortgage Loan Documents typically provide that in the event
of damage to the related Mortgaged Property (a "Casualty"), insurance proceeds
in excess of a specified amount will be paid to the mortgagee rather than the
borrower. The mortgagee may elect to apply such proceeds to the outstanding
indebtedness rather then to restoration of the related Mortgaged Property.
However, the mortgagee may be required to apply such proceeds to restoration of
the related Mortgaged Property if certain conditions are met.
These conditions typically include one or more of the following:
(1) the insurance proceeds payable are less than a specified amount;
(2) less than a specified percentage of the related Mortgaged Property
is destroyed;
(3) the value of the related Mortgaged Property following such
Casualty remains greater than either a specified amount or a
specified percentage of the value of the related Mortgaged
Property before such Casualty;
(4) the Casualty affects less than a specified percentage of the net
rentable area of the Mortgaged Property or interrupts less than a
specified percentage of the rentals from the Mortgaged Property;
(5) such restoration will cost less than a specified amount and such
proceeds are sufficient to complete such restoration;
(6) such restoration can be accomplished within a specified time
period;
(7) the restored Mortgaged Property will adequately secure the related
Mortgage Loan;
(8) income (including rents and insurance proceeds) will be adequate
to service the debt during the restoration period; and
(9) no event of default then exists.
Certain leases require the borrower or the tenant to rebuild the buildings
located upon the related Mortgaged Property in the event of a Casualty, and the
related Mortgage Loan Documents permit the application of insurance proceeds to
satisfy such requirement.
Condemnation. Generally the Mortgage Loans provide that all awards
payable to the borrower in connection with any taking or exercise of the power
of eminent domain with respect to the related Mortgaged Property (a
"Condemnation") will be paid directly to the mortgagee. The mortgagee may elect
to apply such proceeds to the outstanding indebtedness rather than to the
restoration of the related Mortgaged Property. However, the mortgagee may be
required to apply such awards to restoration of the related Mortgaged Property
if certain conditions are met. These conditions typically include one or more of
the following:
(1) the award is less than a specified amount;
(2) the Condemnation affects less than a specified percentage of the
net rentable area of the Mortgaged Property or interrupts less
than a specified percentage of the rentals from the Mortgaged
Property;
S-23
<PAGE>
(3) restoration will cost less than a specified amount and sufficient
funds are available to complete such restoration;
(4) restoration can be accomplished within a specified time period;
(5) income (including the Condemnation award, rentals and insurance
proceeds) will be adequate to service the debt during the
restoration period;
(6) no event of default then exists; and
(7) such restoration is feasible and the Mortgaged Property will be
commercially viable after such restoration.
Certain leases require the borrower or the tenant to restore the related
Mortgaged Property in the event of a Condemnation, and the related Mortgage Loan
Documents permit the application of Condemnation Proceeds to satisfy such
requirement.
Delinquencies and Modifications. As of the Cut-off Date for each
Mortgage Loan, no Mortgage Loan was more than 30 days delinquent in respect of
any Monthly Payment, and no Mortgage Loan has been modified in any material
manner since its origination in connection with any default or threatened
default on the part of the related borrower.
CERTAIN CHARACTERISTICS OF THE MORTGAGE POOL
[Concentration of Mortgage Loans and Borrowers. Several of the Mortgage
Loans have Cut-off Date Principal Balances that are substantially higher than
the average Cut-off Date Principal Balance. The largest single Mortgage Loan has
a Cut-off Date Principal Balance of $[__________], which represents
approximately _____% of the Initial Pool Balance. The ten largest individual
Mortgage Loans have Cut-off Date Principal Balances that represent in the
aggregate approximately __% of the Initial Pool Balance.]
Descriptions of the Ten Largest Individual Mortgage Loans. See Annex B
attached to this Prospectus Supplement.
Affiliated Borrowers. ____, _____, and ___ Mortgage Loans, collectively
representing approximately ___%, ___% and ___% of the Initial Pool Balance,
respectively, were made to [two] or more affiliated entities. No set of Mortgage
Loans made to a single borrower or to a single group of affiliated borrowers
constitutes more than approximately ___% of the Initial Pool Balance. ________
Mortgage Loans, representing approximately ____% of the Initial Pool Balance,
are cross-collateralized and cross-defaulted with other Mortgage Loans made to
the same borrower or to an affiliate thereof. ____ Mortgage Loans, representing
approximately ____% of the Initial Pool Balance, are cross-defaulted with other
Mortgage Loans made to the same borrower or to an affiliate thereof but are not
cross-collateralized. "Cross-Collateralized Loans" and "Cross-Defaulted Loans"
reduce the risk that the inability of an individual Mortgaged Property to
generate net operating income sufficient to pay debt service thereon will result
in defaults (and ultimately losses) by making the collateral available to
support debt service on, and principal repayment of, the aggregate indebtedness
evidenced by the related Cross-Collateralized Loans and by making it easier for
a lender to foreclose on performing collateral should the need arise. Annex C
contains the Affiliated Borrower Loan Table which sets forth more detailed
information regarding Mortgage Loans made to a single borrower or to a single
group of affiliated borrowers.
Geographic Concentration. The Mortgaged Properties are located in
_______ states and the U.S. Virgin Islands. The states with the greatest
concentration of Mortgage Loans are indicated in the table below. No more than
_____% of the Mortgage Loans by Initial Pool Balance are secured by Mortgaged
Properties located in any state not indicated below.
- ------------------------------------------------------------------------------
PERCENTAGE
NUMBER OF OF INITIAL
STATE MORTGAGE LOANS POOL BALANCE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
S-24
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Environmental Risks. An environmental site assessment ("ESA"), a
similar study, an update of a previously conducted Phase 1 ESA, an update based
on information contained in an established database, or for loans with an
original principal balance of less than $1,000,000, an environmental transaction
screen assessment was obtained by the related Mortgage Loan Seller with respect
to each of the Mortgaged Properties within 12 months of the respective dates as
of which the Mortgage Loans were originated or purchased thereby. Other than as
described below, an ESA or such similar study or update has been prepared within
the 12 months preceding the Cut-off Date for each Mortgage Property.
____ of the Mortgage Loans with original principal balances equal to or
greater than $1,000,000, representing approximately ___% of the Initial Pool
Balance, were funded only after receipt of a Phase I ESA performed on the
Mortgaged Properties less than 12 months before origination of the loan. As of
________, 1999, ___ of the Mortgage Loans with original principal balances equal
to greater than $1,000,000, representing approximately ___% of the Initial Pool
Balance, have Phase I ESA report dates that are over twelve months old , and
consequently, an update to these Phase I ESAs based on information contained in
an established database has been ordered and will be received prior to
____________, 1999.
____ of the Mortgage Loans with original principal balances less than
$1,000,000, representing approximately ____% of the Initial Pool Balance, were
funded only after receipt of a Phase I ESA, a similar study, an update of a
previously conducted Phase I ESA or an update based upon information contained
an established database, performed on the Mortgaged Properties less than 12
months before origination of the loan. As of ____________, 1999, ___ of the
Mortgage Loans, representing approximately ___% of the Initial Pool Balance,
have report dates that are over twelve months old. Given the relatively small
original principal balances of these _____ Mortgage Loans and small percentage
of the total Mortgage Pool, no updates have been ordered.
Other than as described below, the Mortgage Loan Sellers have informed
the Depositor that such ESAs, studies or updates did not identify any material
adverse environmental conditions or circumstances, except for:
(1) cases where such conditions or circumstances were investigated
further, and based upon such additional investigation, a qualified
environmental consultant recommended no further investigation or
remediation;
(2) cases where a qualified environmental consultant recommended an
operations and maintenance plan and such plan was obtained or an
escrow reserve was established to cover the estimated costs of
obtaining such plan;
(3) cases where soil or groundwater contamination was suspected or
identified and either (a) such condition was remediated or abated
prior to the Closing Date; (b) a No Further Action letter was
obtained from the applicable regulatory authority, or (c) either
an environmental insurance policy was obtained, a letter of credit
provided, an escrow reserve account established, or an indemnity
from the responsible party was obtained, to cover the estimated
costs of any further required investigation, testing, monitoring
or remediation;
(4) cases in which an offsite property is the location of a leaking
underground storage tank or groundwater contamination, a
responsible party has been identified under applicable law, and
either (a) such condition is not known to have affected the
Mortgaged Property or (b) the responsible party has either
received a No Further Action letter from the applicable regulatory
agency, established a remediation fund, or provided an indemnity
or guaranty to the borrower; or
(5) cases in which, for small loans with an original principal balance
of less than $1,000,000, the borrower has acknowledged in the
Mortgage Loan Documents the existence of such condition and
expressly agreed to comply with all federal, state and local
statutes or regulations respecting such condition.
The foregoing information is based upon ESAs, similar studies or
updates and has not been independently verified by the Mortgage Loan Sellers,
the Depositor, the Transferor, or any of their respective affiliates.
S-25
<PAGE>
The ESAs, studies or updates with respect to certain Mortgaged
Properties identified adverse environmental conditions which could be important
and require material expenditure. [Describe]
You should understand that none of the Depositor, the Mortgage Loan
Sellers, the Master Servicer, the Special Servicer, the Trustee, any affiliate
of any of the foregoing, any environmental consultants or any other person
guarantees the absence of or extent of any environmental condition on the
Mortgaged Properties that could result in environmental liability. The ESAs,
similar studies and updates are limited in scope. An environmental condition may
not be discovered or have its severity revealed thereby. Further, none of the
aforementioned persons or entities can give any assurance that future changes in
applicable environmental laws, the development or discovery of presently unknown
environmental conditions at the Mortgaged Properties or the deterioration of
existing conditions will not require material additional study costs or material
remediation expenses, or generate material liabilities, or otherwise put stress
on the borrower's cash flow.
Other Financing. __ of the Mortgage Loans, representing approximately
____% of the Initial Pool Balance, allow the borrower, under circumstances
specified in the Mortgage Loan Documents, either to maintain an existing
subordinate mortgage encumbering the Mortgaged Property or to grant such a
subordinate mortgage in the future. Such Mortgage Loans are identified in Annex
A. The circumstances specified in the Mortgage Loan Documents typically include
one or more of the following:
(1) The senior mortgagee approves the purpose, amount, term and
amortization period of the proposed subordinate debt, together
with the identity of the subordinate lender and the terms of the
subordinate loan document;
(2) The subordinate mortgage is unconditionally subordinated to the
related Mortgage Loan Documents, [and/or] the subordinate lender
is prohibited from exercising any remedies against the borrower
without the senior mortgagee's consent [and/or] from receiving any
payments on such subordinate debt if, for the preceding 12 months,
either (a) the aggregate debt service coverage ratio for such
Mortgage Loan and such subordinate debt is less than a specified
ratio (generally ranging from [1.20 to 1.30]), or (b) the
aggregate loan to value ratio for such Mortgage Loan and such
subordinate debt is greater than a specified ratio (generally
ranging from [70% to 80%]);
(3) The subordinate debt is non-recourse;
(4) The Mortgaged Property is in acceptable economic condition as of
the effective date of the subordinate financing, such condition
being typically indicated by the following: (a) the aggregate debt
service coverage ratio for such Mortgage Loan and such subordinate
debt is equal to or greater than a specified ratio (generally
[1.20]), and/or (b) the aggregate loan to value ratio for such
Mortgage Loan and such subordinate debt is less than a specified
ratio (generally ranging from [70% to 80%]); and
(5) The conditions set forth in the Pooling and Servicing Agreement
for waiver of Due-on-Encumbrance provisions are met.
____ of the Mortgage Loans, representing approximately ____% of the
Initial Pool Balance, permit a specific existing or proposed subordinate
mortgage without specifying any particular circumstances.
Zoning Compliance. The related Mortgage Loan Seller received assurances
that all of the improvements located upon each respective Mortgaged Property
complied in all material respects with applicable Zoning Laws, or that such
improvements qualified as permitted nonconforming uses. In some cases, the
assurances were limited to a representation or warranty from the related
borrower, for breach of which recourse may be had to such borrower.
Tenant Matters. In connection with __ of the Mortgage Loans,
representing approximately ____% of the Initial Pool Balance, a major tenant
occupies more than 20% of the net leasable area of the related Mortgaged
Property. Many of such major tenants occupy their respective leased premises
pursuant to leases that require them to pay all applicable real property taxes,
maintain insurance over the improvements thereon and maintain the physical
condition of such improvements. With respect to Mortgage Loans secured by a
retail, office or industrial property, the related Mortgage Loan Seller
generally obtained
S-26
<PAGE>
an estoppel certificate from each major tenant in which such tenant indicated
its intention to continue in the relevant lease and that such tenant was not
presently aware of any condition or event that would allow it to terminate such
lease prior to the end of the lease term. Generally, major tenants do not have
investment-grade credit ratings. Additional information regarding major tenants
is set forth in Annex A herein.
Other Information. The following tables and Annex A set forth certain
information with respect to the Mortgage Loans and the Mortgaged Properties.
Such information was primarily derived from financial statements supplied by the
borrowers which, in most cases, are unaudited and were not prepared in
accordance with generally accepted accounting principles. "Net Operating Income"
and "Cash Flow" do not represent the net operating income and cash flow
reflected on the borrowers' financial statements. The differences between "Net
Operating Income" and "Cash Flow" determined by the Mortgage Loan Sellers and
net operating income and cash flow reflected on the borrowers' financial
statements represent the adjustments made by the related Mortgage Loan Seller as
described below, to increase the level of consistency between the financial
statements provided by the borrowers. However, such adjustments were subjective
in nature and were not made in a uniform manner nor in accordance with generally
accepted accounting principles. "Underwritten NOI" and "Underwritten Cash Flow"
are pro forma numbers prepared by the related Mortgage Loan Seller to reflect
their assessment of the market based performance of the related Mortgaged
Property. None of the Depositor, the Transferor or the Underwriter has made any
attempt to verify the accuracy of the financial statements supplied by the
borrowers or the accuracy or appropriateness of the adjustments discussed below
to determine "Net Operating Income," "Cash Flow," "Underwritten NOI," and
"Underwritten Cash Flow."
"Net Operating Income," "Cash Flow," "Underwritten NOI" and
"Underwritten Cash Flow" are not substitutes for, or improvements upon, net
income as determined in accordance with generally accepted accounting principles
as a measure of the results of a Mortgaged Property's operations or for cash
flows from operating activities determined in accordance with generally accepted
accounting principles as a measure of liquidity. No representation is made as to
the future net income or net cash flow of the Mortgaged Properties, nor are "Net
Operating Income," "Cash Flow," "Underwritten NOI" and "Underwritten Cash Flow"
as set forth herein intended to represent such future net income or net cash
flow.
The Mortgage Loan Sellers have had appraisals of the Mortgaged
Properties conducted in compliance with the Tax Code of Professional Ethics and
Standards of Professional Conduct of the Appraisal Institute and the Uniform
Standards of Professional Appraisal Practice as adopted by the Appraisal
Standards Board of the Appraisal Foundation and accepted and incorporated into
FIRREA. No other person has prepared or obtained a separate appraisal or
reappraisal. Another appraiser might arrive at a different opinion of value. Any
Appraised Value might differ from the value that would be determined in a
current appraisal or the amount that would be realized upon a sale or
liquidation of the Mortgaged Property. Accordingly, you should not rely on the
Loan-to-Value Ratios set forth herein as necessarily indicative of the true
Loan-to-Value Ratios.
Debt service coverage ratios are used by lenders of loans secured by
income producing property to measure the ratio of (1) cash currently generated
by a property annually that is available for debt service (that is, cash that
remains after payment of operating expenses) to (2) required annual debt service
payments. Debt service coverage ratios, however, only measure the current, or
recent, ability of a property to service mortgage debt. If a property is not
expected to have a stable operating cash flow (because, for instance, it is
subject to leases that expire during the loan term and provide for above-market
rents, or that are difficult to replace), a debt service coverage ratio may not
be a reliable indicator of a property's ability to service the mortgage debt
over the entire remaining loan term. In addition, a debt service coverage ratio
may not adequately reflect the significant amounts of cash that a property owner
may be required to expend to pay for capital improvements, tenant improvements
and leasing commissions when expiring leases are replaced. Accordingly, we can
give no assurance and make no representation that the Debt Service Coverage
Ratios accurately reflect the future ability of a Mortgaged Property to generate
sufficient cash flow to repay the related Mortgage Loan.
For purposes of the following tables and Annex A:
(1) "Net Operating Income" or "NOI" means revenue derived from the use
and operation of the Mortgaged Property (primarily rental income)
less operating expenses (such as utilities, general administrative
expenses, management fees, advertising, repairs and maintenance)
and less fixed expenses (such as insurance and real estate taxes).
NOI generally does not reflect capital expenditures, replacement
reserves, interest expense, income taxes and non-cash items such
as depreciation or amortization. The Mortgage Loan Sellers have
S-27
<PAGE>
informed the Depositor that they have adjusted items of revenue
and expense shown on the borrower's financial statements in order
to reflect the historical operating results for a Mortgaged
Property on a normalized basis (e.g., adjusting for the payment
of two years of real estate taxes in a single year). Revenue was
generally adjusted to eliminate security deposits and to
eliminate non-recurring items and items not related to the
operation of the Mortgaged Property. Expense was generally
adjusted to eliminate distributions to owners, items of expense
not related to the operation of the Mortgaged Property,
non-recurring items, such as capital expenditures, and refunds of
security deposits. The Mortgage Loan Sellers have informed the
Depositor that they have made the adjustments based upon their
review of borrower financial statements, their own experience in
originating loans and, in some cases, conversations with
borrowers. The adjustments were subjective in nature and were not
uniform for each Mortgaged Property. ["96 NOI" and "97 NOI"
reflect calendar year operations for 1996 and 1997, respectively.
"98 NOI," on the other hand, reflects operations for one of three
periods: (a) at least eight months, annualized, (b) the trailing
12 months beginning some month in 1998, or (c) calendar year
1998.]
(2) "Cash Flow" means the NOI for the related Mortgaged Property
decreased by tenant improvements, leasing commissions, capital
expenditures and other non-recurring expenditures, as appropriate.
(3) "Underwritten NOI" means the NOI for the related Mortgaged
Property on an annual basis as determined by the related Mortgage
Loan Seller in accordance with its underwriting guidelines for
similar properties. Although there are differences in the
underwriting guidelines of the Mortgage Loan Sellers, the nature
and types of adjustments made by each of them were generally the
same. Revenue generally is calculated as follows. Rental revenue
is calculated using the lower of actual or market rental rates,
with a vacancy rate equal to the higher of the Mortgaged
Property's historical rate, the market rate or an assumed vacancy
rate. Other revenues, such as parking fees, percentage rents,
vending income, etc. are included only if sustainable. Revenues,
such as application fees and lease termination fees, are not
included. Operating and fixed expenses generally are adjusted to
reflect the higher of the Mortgaged Property's average expenses or
a mid-range industry norm for expenses on similar properties in
similar locations plus the greater of actual management fees or an
assumed market rate management fee and a reserve for replacement
of capital items.
(4) "Underwritten Cash Flow" for the related Mortgage Loan Seller
means the Underwritten NOI for such Mortgage Loan decreased by an
amount that the related Mortgage Loan Seller has determined to be
an appropriate allowance, based upon its underwriting guidelines,
for average annual tenant improvements and leasing commissions.
[The related Mortgage Loan Seller] calculation is also decreased
by capital expenditures and other expenditures, as appropriate.
(5) "Appraised Value" means the appraised value of such property as
determined by an appraisal made not more than nine months prior to
the origination date of the related Mortgage Loan and reviewed by
the related Mortgage Loan Seller.
(6) "Annual Debt Service" means, for any Mortgage Loan, the current
annual debt service (including interest allocable to the payment
of the related Servicing Fee, Trustee Fee and principal) payable
with respect to such Mortgage Loan during the 12-month period
commencing on the Cut-off Date (assuming no prepayments occur).
(7) "Debt Service Coverage Ratio," "Underwritten DSCR" or "DSCR"
means, (a) the Underwritten Cash Flow for the related Mortgaged
Property divided by (b) the Annual Debt Service for such Mortgage
Loan.
(8) "Loan-to-Value Ratio," "Appraised LTV" or "LTV" means the
principal balance of such Mortgage Loan as of the Cut-off Date
divided by the Appraised Value of the related Mortgaged Property.
(9) "Balloon/ARD LTV" means the Balloon Amount or ARD Amount for such
Mortgage Loan as of the Cut-off Date divided by the Appraised
Value of the related Mortgaged Property.
S-28
<PAGE>
(10) "ARD Amount or ARD Balance" for any ARD Loan is equal to the
Scheduled Principal Balance as of the related Anticipated
Repayment Date.
(11) "Balloon Amount" or "Balloon Balance" means the principal amount,
if any, due at maturity, taking into account scheduled
amortization, assuming no prepayments or defaults.
(12) "Occupancy Rate" means the percentage of gross leasable area,
rooms, units, beds, pads or sites of a Mortgaged Property that are
leased or occupied. Occupancy rates are calculated based upon the
most recent rent information received by the related Mortgage Loan
Seller. The "Occupancy Percentage" and "Occupancy Date" for each
Mortgage Loan are based upon rent information received by the
related Mortgage Loan Seller from the related borrower or mortgage
loan originator (if other than the related Mortgage Loan Seller).
(13) "Remaining Term to Maturity" means the number of Due Dates
remaining from the Cut-off Date until the maturity of a mortgage
loan (or, for ARD Loans, through the related Anticipated Repayment
Dates).
(14) "Remaining Amortization Term" for any Mortgage Loan is calculated
as the original amortization term of the related Mortgaged Loan
(based upon such Mortgage Loan's original balance, interest rate
and monthly payment, in the case of the ARD Loans, assuming
prepayment in full on the related Anticipated Repayment Date) less
the number of Due Dates through and including the Cut-off Date.
(15) The "Year Built" is based on information contained in deed
records, appraisals, engineering surveys, architectural papers,
title insurance, and/or other insurance policies.
(16) The "Year Renovated" is based upon information contained in the
appraisal of the related Mortgaged Property.
(17) All calculations of any applicable Lockout Period, Defeasance
Lockout Period, Yield Maintenance Period, Prepayment Premium or
Yield Maintenance Charge for a Mortgage Loan are based upon such
Mortgage Loan's first scheduled payment date.
(18) For each Mortgage Loan secured by more than one Multifamily
Property or by more than one Congregate Care Property, the "Number
of Units," "Units/SF," "Appraised Value," "Current Occupancy,"
"Underwritten NOI" and "Underwritten Cash Flow" is the sum of the
respective values for each Mortgaged Property securing such
Mortgaged Loan.
(19) "Weighted Average Maturity" means the weighted average of the
Remaining Terms to Maturity of the Mortgage Loans.
(20) Due to rounding, percentages may not add to 100% and amounts may
not add to the indicated total.
S-29
<PAGE>
<TABLE>
<CAPTION>
COLLATERAL CONTRIBUTORS
-----------------------
SCHEDULED
WEIGHTED PRINCIPAL
PERCENT OF AVERAGE WEIGHTED BALANCE AS OF
NUMBER OF INITIAL INTEREST AVERAGE THE CUT-OFF
COLLATERAL CONTRIBUTORS LOANS POOL BALANCE RATE DSCR(X) DATE
----------------------- ----- ------------ ---- ------- ----
<S> <C> <C> <C> <C> <C>
% % $
% % $
% % $
----- ------- ---- ------- ---------
TOTAL % % $
==========================================================================================================================
<CAPTION>
PAYMENT TYPES
-------------
SCHEDULED
WEIGHTED WEIGHTED WEIGHTED PRINCIPAL
PERCENT OF AVERAGE AVERAGE AVERAGE WEIGHTED BALANCE
NUMBER OF INITIAL INTEREST REMAINING ORIGINAL AVERAGE AS OF THE
PAYMENT TYPES LOANS POOL BALANCE RATE TERM LTV DSCR(X) CUT-OFF DATE
- ------------- ----- ------------ ---- ----- --- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
[AMORT. BALLOON % % $
FULLY AMORTIZING % % $
INT. ONLY, THEN AMORT BALL. % % $
INT. ONLY, THEN AMORT. % % $
GRADUATED P&I BALLOON] % % $
----- -------- ---- ----- --- ------- ------------
TOTAL 100.00% % $
========================================================================================================================
</TABLE>
S-30
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION OF CUT-OFF DATE PRINCIPAL BALANCES
-----------------------------------------------
PERCENTAGE OF WEIGHTED WEIGHTED SCHEDULED
AGGREGATE AVERAGE AVERAGE WEIGHTED PRINCIPAL
NUMBER OF CURRENT MORTGAGE REMAINING AVERAGE WEIGHTED BALANCE AS OF
RANGE OF MORTGAGE PRINCIPAL INTEREST TERM TO CURRENT AVERAGE THE CUT-OFF
CURRENT PRINCIPAL BALANCES LOANS BALANCE RATE MATURITY LTV DSCR(X) DATE
-------------------------- ----- ------- ---- -------- --- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
[255,509 - 499,999 % % $
500,000 - 999,999 % % $
1,000,000 - 1,999,999 % % $
2,000,000 - 2,999,999 % % $
3,000,000 - 3,999,999 % % $
4,000,000 - 4,999,999 % % $
5,000,000 - 5,999,999 % % $
6,000,000 - 6,999,999 % % $
7,000,000 - 7,999,999 % % $
8,000,000 - 8,999,999 % % $
9,000,000 - 9,999,999 % % $
10,000,000 - 11,999,999 % % $
12,000,000 - 13,999,999 % % $
14,000,000 - 16,999,999 % % $
17,000,000 OR MORE] % % $
------------------ ------ ----- ----- ------- ------- ------- ------------
TOTAL 100% % $
===========================================================================================================================
<CAPTION>
RANGE OF MORTGAGE RATES
-----------------------
SCHEDULED
WEIGHTED WEIGHTED WEIGHTED PRINCIPAL
PERCENT OF AVERAGE AVERAGE AVERAGE WEIGHTED BALANCE
RANGE OF NUMBER OF INITIAL INTEREST REMAINING CURRENT AVERAGE AS OF THE
MORTGAGE RATES LOANS POOL BALANCE RATE TERM LTV DSCR(X) CUT-OFF DATE
- -------------- ----- ------------ ---- ----- --- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
6.0001 - 6.2500% % % $
6.2501 - 6.5000% % % $
6.5001 - 6.7500% % % $
6.7501 - 7.0000% % % $
7.0001 - 7.2500% % % $
7.2501 - 7.5000% % % $
7.5001 - 7.7500% % % $
7.7501 - 8.0000% % % $
8.0001 - 8.2500% % % $
8.2501 - 8.5000% % % $
8.5001 - 8.7500% % % $
8.7501 - 9.0000% % % $
9.0001 - 9.2500% % % $
9.2501 - 9.5000% % % $
10.7501 - 11.0000%] % $
------- --------- --------- ---------- --------- --------- -------------
TOTAL 100.00% % $
============================================================================================================================
</TABLE>
S-31
<PAGE>
<TABLE>
<CAPTION>
RANGE OF REMAINING TERMS TO MATURITY (MONTHS)
---------------------------------------------
REMAINING WEIGHTED WEIGHTED WEIGHTED
TERMS TO PERCENT OF AVERAGE AVERAGE AVERAGE WEIGHTED CURRENT
MATURITY NUMBER OF INITIAL INTEREST REMAINING CURRENT AVERAGE PRINCIPAL
(MONTHS) LOANS POOL BALANCE RATE TERM LTV DSCR(X) BALANCE
-------- ----- ------------ ---- ---- --- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
[71 - 90 % % $
91 - 110 % % $
111 - 130 % % $
131 - 150 % % $
151 - 170 % % $
171 - 190 % % $
191 - 210 % % $
211 - 230 % % $
231 - 250] % % $
-------- ------- ------- -------- ------- --------- -----------
TOTAL 100.00% % $
============================================================================================================================
<CAPTION>
RANGE OF MATURITY YEARS
-----------------------
SCHEDULED
WEIGHTED WEIGHTED WEIGHTED PRINCIPAL
PERCENT OF AVERAGE AVERAGE AVERAGE WEIGHTED BALANCE AS OF
MATURITY NUMBER OF INITIAL INTEREST REMAINING ORIGINAL AVERAGE THE CUT-OFF
YEAR LOANS POOL BALANCE RATE TERM LTV DSCR(X) DATE
---- ----- ------------ ---- ---- --- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
[2005 % % $
2006 % % $
2007 % % $
2008 % % $
2009 % % $
2010 % % $
2011 % % $
2012 % % $
2013 % % $
2015 % % $
2016 % % $
2017 % % $
2018] % % $
-------- ------- ------- ---------- ---------- ---------- -------------
TOTAL 100.00% % $
============================================================================================================================
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
RANGE OF ORIGINAL LOAN-TO-VALUE RATIOS
--------------------------------------
SCHEDULED
WEIGHTED WEIGHTED WEIGHTED PRINCIPAL
PERCENT OF AVERAGE AVERAGE AVERAGE WEIGHTED BALANCE
NUMBER OF INITIAL INTEREST REMAINING ORIGINAL AVERAGE AS OF THE
ORIGINAL LTV LOANS POOL BALANCE RATE TERM LTV DSCR(X) CUT-OFF DATE
- ------------ ----- ------------ ---- ---- --- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
[15.01 - 35.00% % % $
40.01 - 45.00% % % $
45.01 - 50.00% % % $
50.01 - 55.00% % % $
55.01 - 60.00% % % $
60.01 - 65.00% % % $
65.01 - 70.00% % % $
70.01 - 75.00% % % $
75.01 - 80.00% % % $
80.01 - 85.00% % % $
85.01 - 95.00% % % $
95.01 - 96.00%] % % $
--------- ------- ------- --------- --------- ----------- -----------
TOTAL 100.00% % $
============================================================================================================================
<CAPTION>
RANGE OF LOAN ORIGINATION YEARS
-------------------------------
SCHEDULED
WEIGHTED WEIGHTED WEIGHTED PRINCIPAL
PERCENT OF AVERAGE AVERAGE AVERAGE WEIGHTED BALANCE AS OF
NUMBER OF INITIAL INTEREST REMAINING ORIGINAL AVERAGE THE CUT-OFF
ORIGINATION YEAR LOANS POOL BALANCE RATE TERM LTV DSCR(X) DATE
- ---------------- ----- ------------ ---- ---- --- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
[1997 % % $
1998 % % $
1999] % % $
------- ------- ------- ------- ------- ------- ----------------
TOTAL 100.00% % $
============================================================================================================================
</TABLE>
S-33
<PAGE>
<TABLE>
<CAPTION>
RANGE OF DEBT SERVICE COVERAGE RATIOS
-------------------------------------
WEIGHTED SCHEDULED
AVERAGE WEIGHTED WEIGHTED PRINCIPAL
PERCENT OF MORTGAGE AVERAGE AVERAGE WEIGHTED BALANCE AS OF
NUMBER OF INITIAL INTEREST REMAINING ORIGINAL AVERAGE THE CUT-OFF
DSCR(X) LOANS POOL BALANCE RATE TERM LTV DSCR(X) DATE
- ------- ----- ------------ ---- ---- --- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
[.9 - 1.00 % % $
1.01 - 1.15 % % $
1.16 - 1.20 % % $
1.21 - 1.25 % % $
1.26 - 1.30 % % $
1.31 - 1.35 % % $
1.36 - 1.40 % % $
1.41 - 1.45 % % $
1.46 - 1.50 % % $
1.51 - 1.55 % % $
1.56 - 1.60 % % $
1.61 - 1.65 % % $
1.66 - 1.70 % % $
1.71 - 1.75 % % $
1.76 - 1.80 % % $
1.81 - 1.85 % % $
1.86 - 1.90 % % $
1.91 - 1.95 % % $
1.96 - 2.00 % % $
2.00 - 2.15 % % $
2.16 - 2.50 % % $
2.51 - 3.00] % % $
-------- ------- ------- ----------- -------- ----------- --------------
TOTAL 100.00% % $
============================================================================================================================
</TABLE>
S-34
<PAGE>
<TABLE>
<CAPTION>
PROPERTY TYPES
--------------
WEIGHTED SCHEDULED
PERCENT AVERAGE WEIGHTED WEIGHTED PRINCIPAL
NUMBER OF OF INITIAL MORTGAGE AVERAGE AVERAGE WEIGHTED BALANCE
MORTGAGED POOL INTEREST REMAINING ORIGINAL AVERAGE AS OF THE
PROPERTY TYPE PROPERTIES BALANCE RATE TERM LTV DSCR(X) CUT-OFF DATE
- ------------- ---------- ------- ---- ----- --- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
[ASSISTED LIVING FACILITY % % $
CONGREGATE CARE % % $
HOSPITALITY % % $
INDUSTRIAL % % $
MIXED USE % % $
MOBILE HOME PARK % % $
MULTIFAMILY % % $
NURSING HOME % % $
OFFICE % % $
OFFICE/INDUSTRIAL % % $
RETAIL-ANCHORED % % $
RETAIL-SHADOW ANCHORED % % $
RETAIL-SINGLE TENANT % % $
RETAIL-UNANCHORED % % $
SELF-STORAGE % % $
SPECIAL PURPOSE % % $
WAREHOUSE] % % $
-------- ------- ------- ----------- --------- --------- --------------
TOTAL 100.00% % $
=============================================================================================================================
</TABLE>
S-35
<PAGE>
<TABLE>
<CAPTION>
GEOGRAPHIC DISTRIBUTION OF THE MORTGAGED PROPERTIES
---------------------------------------------------
SCHEDULED
WEIGHTED WEIGHTED WEIGHTED PRINCIPAL
NUMBER OF PERCENT OF AVERAGE AVERAGE AVERAGE WEIGHTED BALANCE
MORTGAGED INITIAL MORTGAGE REMAINING ORIGINAL AVERAGE AS OF THE
STATE PROPERTIES POOL BALANCE INTEREST RATE TERM LTV DSCR(X) CUT-OFF DATE
- ----- ---------- ------------ ------------- ----- --- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
[ALABAMA % % $
ALASKA % % $
ARIZONA % % $
CALIFORNIA % % $
COLORADO % % $
CONNECTICUT % % $
FLORIDA % % $
GEORGIA % % $
HAWAII % % $
IDAHO % % $
ILLINOIS % % $
INDIANA % % $
KANSAS % % $
KENTUCKY % % $
LOUISIANA % % $
MAINE % % $
MARYLAND % % $
MASSACHUSETTS % % $
MICHIGAN % % $
MINNESOTA % % $
MISSISSIPPI % % $
MISSOURI % % $
MONTANA % % $
NEVADA % % $
NEW HAMPSHIRE % % $
NEW JERSEY % % $
NEW YORK % % $
NORTH DAKOTA % % $
OHIO % % $
OKLAHOMA % % $
OREGON % % $
PENNSYLVANIA % % $
TENNESSEE % % $
TEXAS % % $
UTAH % % $
VERMONT % % $
VIRGIN ISLANDS % % $
VIRGINIA % % $
WASHINGTON] % % $
-------- ------- ------- ----------- --------- -------- ----------------
TOTAL 100.00% % $
============================================================================================================================
</TABLE>
S-36
<PAGE>
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The foregoing description of the Mortgage Pool and the Mortgaged
Properties is based upon scheduled principal payments due on the Mortgage Loans
on or before the Cut-off Date. Before we issue the Certificates, one or more
Mortgage Loans may be removed from the Mortgage Pool if the Depositor deems such
removal necessary or appropriate or if such Mortgage Loans are prepaid. A
limited number of other mortgage loans may be included in the Mortgage Pool
before we issue the Certificates, unless including such mortgage loans would
materially alter the characteristics of the Mortgage Pool, as described in this
Prospectus Supplement. Accordingly, the characteristics of the Mortgage Loans
constituting the Mortgage Pool at the time we issue the Certificates may vary
from those described herein.
A Current Report on Form 8-K (the "Form 8-K") will be filed, together
with the Pooling and Servicing Agreement, with the Securities and Exchange
Commission within 15 days after the initial issuance of the Certificates. The
Form 8-K will be available to the Certificateholders promptly after its filing.
In the event that Mortgage Loans are removed from or added to the Mortgage Pool
as set forth in the preceding paragraph, such removal or addition will be noted
in the Form 8-K.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
Each Mortgage Loan Seller will make certain representations and
warranties to the Transferor in the related Underlying Mortgage Loan Purchase
Agreement. The Transferor will make substantially similar representations and
warranties to the Depositor in the Mortgage Loan Sale Agreement. The sole remedy
available to the Trustee or Certificateholders for a Mortgage Loan Seller's
failure to cure any breach of such representations and warranties that
materially and adversely affect the interest of the Certificateholders in such
Mortgage Loan is for the Depositor to cure or repurchase the affected Mortgage
Loan within 85 days of receiving notice of such breach or as otherwise provided
in the Pooling and Servicing Agreement. The Depositor will assign its rights
under the Mortgage Loan Purchase Agreement (and therewith the rights of the
Transferor under the Underlying Mortgage Loan Purchase Agreements) to the
Trustee for the benefit of the Certificateholders.
All references in these representations and warranties are to related
documents and entities unless otherwise indicated. The representations and
warranties are made for each Mortgage Loan as of the date specified in the
related Underlying Mortgage Loan Purchase Agreement, and include the following
(subject to certain exceptions set forth in such Underlying Mortgage Loan
Purchase Agreement):
(1) Mortgage Loan Characteristics. The information set forth in the
mortgage loan schedule is true and complete in all material
respects. In the case of the information set forth with respect to
each Mortgage Loan under the captions "Physical Occupancy %,"
"Occupancy As of Date," ["96 NOI," "97 NOI," "98 NOI,"]
"Underwritten NOI," "Underwritten Net Cash Flow" and "Underwritten
NOI DSCR", however, the Mortgage Loan Seller represents only that
such information is an accurate reproduction or derivation, as
adjusted in accordance with its customary underwriting practices,
of the information provided to it by the related borrower. The
Mortgage Loan Seller takes no responsibility for the truth,
accuracy or completeness of any such information; provided,
however, that the Mortgage Loan Seller has no actual knowledge
that such information is incorrect, inaccurate or incomplete
following the reasonable and customary investigation performed by
the Mortgage Loan Seller in connection with its origination of the
Mortgage Loans.
(2) Loan Origination; Loan Underwriting. The Mortgage Loan was
originated by the Mortgage Loan Seller, an affiliate of the
Mortgage Loan Seller or an originator approved by the Mortgage
Loan Seller, and the Mortgage Loan substantially complied with all
of the terms, conditions and requirements of the Mortgage Loan
Seller's underwriting standards in effect at the time of the
origination or purchase of such Mortgage Loan, subject to such
exceptions as are noted in the related Mortgage File and as the
Mortgage Loan Seller approved in the exercise of discretion
consistent with that of a prudent commercial mortgage lender.
(3) Domestic Borrower. The related borrower is an individual who is a
citizen of, or an entity organized under the laws of, a state of
the United States.
(4) Single-Purpose Entity. Each borrower of a Mortgage Loan in excess
of $25 million is an entity which has represented in connection
with the origination of the Mortgage Loan, or whose organizational
documents
S-37
<PAGE>
provide that so long as the Mortgage Loan is outstanding it will
be a single-purpose entity. (For this purpose, "single-purpose
entity" shall mean a person, other than an individual, which does
not engage in any business unrelated to the related Mortgaged
Property and its financing, does not have any assets other than
those related to its interest in such Mortgaged Property or its
financing, or any indebtedness other than as permitted by the
related Mortgage or the other documents in the Mortgage File, has
its own books and records separate and apart from any other person
and holds itself out as being a legal entity, separate and apart
from any other person.
(5) Delivery of Mortgage Loan Documents. The related Mortgage Loan
Seller has or will deliver to the Transferor or its designee,
within the time period prescribed by the related Underlying
Mortgage Loan Purchase Agreement, each of the documents comprising
the Mortgage File for each Mortgage Loan.
(6) Payment Current. All payments required to be made with respect to
the Mortgage Loan under the terms of the related promissory note
or Mortgage up to the closing date (including any applicable grace
or cure period) specified in the related Underlying Mortgage Loan
Purchase Agreement have been made. Within the twelve months
proceeding the closing date, there had not been any delinquency in
excess of 30 days.
(7) Equity Participation or Participation Interest. The Mortgage Loan
contains no equity participation by the Mortgage Loan Seller and
is a whole loan and not a participation interest. Neither the
related promissory note nor the Mortgage provides for negative
amortization or any contingent or additional participation
interest in the cash flow of the Mortgaged Property. The Mortgage
Loan Seller has no ownership interest in such Mortgaged Property
or in the borrower. Neither the Mortgage Loan Seller nor any
affiliate of the Mortgage Loan Seller has any obligation to make
any capital contributions to the related borrower under the
Mortgage or any other related Mortgage Loan Document.
(8) Compliance with Applicable Laws. As of its origination, the
Mortgage Loan either complied with or was exempt from applicable
state or federal laws, regulations and other requirements
pertaining to usury. To the best of the Mortgage Loan Seller's
knowledge, as of the origination of the Mortgage Loan, the related
originator complied in all material respects with the requirements
of all other federal, state or local laws applicable to the
origination, servicing and collection of the Mortgage Loan,
including truth-in-lending laws, real estate settlement
procedures, equal credit opportunity and disclosure laws. No
governmental or regulatory approval or consent is required for the
sale of the Mortgage Loan by the Mortgage Loan Seller, and the
Mortgage Loan Seller has full right, power and authority to sell
such Mortgage Loan. To the extent necessary to ensure the
enforceability and effective transfer of the Mortgage Loan and the
related promissory note, the originator and/or the Mortgage Loan
Seller each was qualified and appropriately licensed to conduct
business in the jurisdiction in which the Mortgaged Property is
located at the time it had possession of the related promissory
note.
(9) Proceeds Fully Disbursed. The proceeds of the Mortgage Loan have
been fully disbursed. Some of the proceeds may have been disbursed
into reserve accounts that are controlled by the Mortgage Loan
Seller and have been established as described in Annex A. There is
no requirement for future advances under the Mortgage Loan.
(10) Origination Expenses Paid. The borrower has paid, or has made
arrangements to pay, on a timely basis and to the appropriate
person all costs, fees and expenses incurred in connection with
the origination and closing of the Mortgage Loan, including
recording costs and fees.
(11) Documents Valid. Each of the related promissory note, the Mortgage
and any other related mortgage loan document is the legal, valid
and binding obligation of the borrower, the related guarantor or
other party executing such document and is enforceable in
accordance with its terms. Those documents are subject to any
non-recourse or partial recourse provisions contained therein and
may also be subject to limitations to enforceability arising under
bankruptcy, insolvency, reorganization or other similar laws
affecting enforcement of creditors' rights generally, general
principles of equity, and any applicable anti-deficiency law.
There is no valid offset, defense, counterclaim or right of
rescission with respect to the promissory note,
S-38
<PAGE>
Mortgage or other document. The operation of any of the terms of
the promissory note or the Mortgage, or the exercise of any right
thereunder, will not render either the Mortgage or the promissory
note unenforceable or subject to any valid right of rescission,
offset, counterclaim or defense, including the defense of usury.
The Mortgage Loan Seller has no knowledge that any such right of
rescission, offset, counterclaim or defense has been asserted or
is available with respect to the promissory note or the Mortgage.
The Mortgage and related promissory note do not require the
mortgagee to release any portion of the Mortgaged Property except
upon payment in full of the loan or the exercise of a defeasance
feature calculation is subject to release at no charge upon
satisfaction of certain legal requirements set forth in the
related mortgage loan documents]. In the case of certain Mortgaged
Properties securing cross-collateralized Mortgage Loans and
certain Mortgage Loans secured by multiple Mortgaged Properties,
the mortgagee may be required to release a Mortgaged Property upon
payment of a portion of the Mortgage Loan, determined as specified
in the related mortgage loan documents.
(12) Assignment of Mortgage: Note Endorsement. The assignment of
mortgage is or will be in recordable form and constitutes or will
constitute the Mortgage Loan Seller's legal, valid and binding
assignment to the Transferor of the Mortgage and any related
assignment of leases, rents and profits or assignment of
assignment of leases, rents and profits. The Mortgage Loan
Seller's endorsement and delivery of the related promissory note
to the Transferor in accordance with the terms of the Underlying
Mortgage Loan Purchase Agreement constitutes or will constitute a
legal, valid and binding assignment to the Transferor of such
promissory note, and together with the Mortgage Loan Seller's
execution and delivery of such assignment of mortgage to the
Transferor legally and validly conveys or will convey all right,
title and interest of the Mortgage Loan Seller in such Mortgage
Loan to the Transferor.
(13) First Lien. Based on the related policy of title insurance, the
Mortgage is a legal, valid and enforceable first lien on the
Mortgaged Property, except the Mortgage securing Mortgage Loan
Control # ___, which is a legal, valid and enforceable second lien
on the related Mortgaged Property. Such first lien includes all
buildings and improvements on such Mortgaged Property and all
installations and mechanical, electrical, plumbing, heating and
air conditioning systems located in or annexed to such buildings,
and all additions, alterations and replacements made at any time
prior to the closing date of the Mortgage Loan. Such first lien
does not include any related personal property. The Mortgaged
Property is free and clear of all encumbrances and liens having
priority over the first lien of such Mortgage, except for:
(a) the lien of current real estate taxes and special assessments
not yet delinquent or accruing interest or penalties;
(b) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date
of recording of such Mortgage which do not materially and
adversely (A) affect the value of the Mortgaged Property as
security for the Mortgage Loan or (B) interfere with the
related borrower's ability to make required principal and
interest payments or to make use of such Mortgaged Property
for the intended purposes;
(c) leases and subleases for the Mortgaged Property which the
Mortgage Loan Seller did not require to be subordinated to
the lien of the Mortgage, provided that such leases and
subleases, if any, are with entities which are not affiliated
with the Mortgage Loan Seller; and
(d) other matters which do not materially and adversely (A)
affect the value of the Mortgaged Property as security for
the Mortgage Loan, or (B) interfere with the related
borrower's ability to make required principal and interest
payments or to make use of the Mortgaged Property for the
intended purposes.
S-39
<PAGE>
(14) No Modification, Release or Satisfaction. Except by a written
instrument which has been delivered to the Transferor or its
designee as part of the Mortgage File:
(a) neither the Mortgage nor the related promissory note
(including any amendments or supplements thereto) has been
impaired, waived, modified, altered, satisfied, canceled,
subordinated or rescinded;
(b) the Mortgaged Property has not been released from the lien of
the Mortgage; and
(c) the borrower has not been released from its obligations under
the Mortgage, in whole or in any part, in any manner which
would materially interfere with the security intended to be
provided by such Mortgage.
(15) Defeasance. Mortgage Loans that permit defeasance provide that,
after the applicable Defeasance Lockout Period, the borrower may
obtain the release of the related Mortgaged Property, or a portion
thereof, from the lien of the related Mortgage by pledging to the
Trustee noncallable U.S. Treasury or other noncallable U.S.
government obligations that provide payments on or prior to all
successive payment dates to maturity (or, in the case of the ARD
Loans, through the related Anticipated Repayment Dates) in the
amounts due on such 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 or include other conditions which
will ensure that the exercise of a defeasance option will not
cause either REMIC to fail to be a REMIC. Some of the Mortgage
Loans require that a REMIC opinion be provided as a condition to
exercise of any defeasance option, and the Mortgage or other
related Mortgage Loan Documents generally require the satisfaction
of one or more of the following conditions prior to the defeasance
of the related Mortgaged Property:
(a) the borrower must provide the mortgagee with a prior written
notice of not less than 30 days;
(b) the borrower must pay to the mortgagee or the servicer of the
Mortgage Loan, as the case may be, an amount sufficient to
purchase the government obligations described above in this
(15);
(c) the borrower must provide a written confirmation from the
Rating Agencies indicating that such defeasance will not
result in a downgrading, withdrawal or qualification of the
respective ratings of any outstanding classes of
Certificates;
(d) the borrower must deliver an officer's certificate to the
effect that all of the borrower's obligations with respect to
the Mortgage Loan have been satisfied and that the Mortgage
Loan is not in default; and
(e) the borrower must undertake to provide such other documents
or information as the mortgagee may reasonably request in
connection with such defeasance.
(16) No Delinquent Taxes or Assessments. The Mortgage Loan Seller knows
of no tax or governmental assessment, or installment thereof,
which became due prior to the Closing Date and which, if left
unpaid, would be, or might become, a lien on the Mortgaged
Property having priority over the Mortgage which has become
delinquent such that (a) such tax, assessment or installment has
commenced to accrue interest or penalties, or (b) the applicable
taxing authority may commence proceedings to collect such tax,
assessment or installment.
(17) Escrow or Reserve Deposits. As of the date specified in the
Underlying Mortgage Loan Purchase Agreement: (a) the related
reserve accounts, if any, contain all escrow deposits and other
payments required by the terms of the mortgage loan documents to
be held by the Mortgage Loan Seller as of the date specified; and
(b) the Mortgage Loan Seller has transferred all amounts on
deposit in the related reserve account(s) to the Transferor. All
escrow deposits required under the promissory note, the Mortgage
and any other
S-40
<PAGE>
Mortgage Loan Documents that are not being transferred to the
Transferor have been applied in accordance with their intended
purposes by the mortgage loan originator, Mortgage Loan Seller or
its agent.
(18) No Third Party Advances. The Mortgage Loan Seller has not,
directly or indirectly, (a) advanced funds; (b) induced or
solicited any payment from a Person other than the borrower; or
(c) to the Mortgage Loan Seller's knowledge, received payment,
from any person other than the borrower, of any amount required
under the promissory note or the Mortgage, except for interest
accruing from the date of such promissory note or the date of
disbursement of the proceeds of such Mortgage Loan, whichever is
later, to the date which precedes by 30 days the first Due Date
under such promissory note.
(19) No Condemnation or Damages. To the best of the Mortgage Loan
Seller's knowledge, except for partial condemnation proceedings
which do not materially and adversely affect the value of the
Mortgaged Property as security for the Mortgage Loan, no
proceedings for the total or partial condemnation of the Mortgaged
Property (a) have occurred since the date of the appraisal relied
upon in the origination of the Mortgage Loan or (b) are pending or
threatened. To the best of the Mortgage Loan Seller's knowledge,
the Mortgaged Property is free of material damage. The Mortgage
requires that any related condemnation award be applied either to
the restoration of the Mortgaged Property or the payment of the
outstanding principal balance of or accrued interest on the
Mortgage Loan.
(20) No Mechanics' Liens. To the knowledge of the Mortgage Loan Seller,
the Mortgaged Property (excluding any related personal property)
is free and clear of any mechanics' or materialmen's or similar
liens. No rights are outstanding that, under law, could give rise
to any such liens which are or may be prior to, or equal with, the
lien of the related Mortgage, except those which are insured
against by the lender's title insurance policy referred to in (24)
below.
(21) Title Survey: Improvements; Separate Tax Parcels. The Mortgage
Loan Seller has satisfied the requirements of the title insurance
company for deletion from the title insurance policy of the
standard general exceptions for encroachments, boundary and other
survey matters and, if possible, for easements not shown by the
public records. With respect to any of the Mortgaged Properties
located in jurisdictions such as the State of Texas in which the
exception for easements not shown by the public records could not
be deleted, such exception is customarily accepted by prudent
commercial mortgage lenders in such jurisdiction.
Except for encroachments and similar matters which are (a)
inconsequential, (b) do not materially and adversely affect the
value of the Mortgaged Property as security for the Mortgage Loan,
or (c) are insured against by the lender's title insurance policy
referred to in (24) below, surveys and/or title insurance obtained
at the time of origination indicated that (a) none of the
improvements which were included for the purpose of determining
the appraised value of the Mortgaged Property in the appraisal at
the time of the origination of the Mortgage Loan lie outside the
boundaries and building restriction lines of the Mortgaged
Property, and (b) no improvements on adjoining properties encroach
upon the Mortgaged Property.
Each Mortgaged Property constitutes one or more complete separate
tax lots or is subject to an endorsement under the related title
insurance policy described in (24) below.
(22) Title. The Mortgage Loan Seller has good title to and is the sole
owner and beneficial holder of the Mortgage Loan. The Mortgage
Loan Seller has full right and authority to sell and assign the
Mortgage Loan, is the sole mortgagee or beneficiary of record
under the Mortgage and is transferring the Mortgage Loan to the
Transferor free and clear of any and all liens, encumbrances,
participation interests, pledges, charges or security interests of
any nature encumbering the Mortgage Loan.
(23) Compliance with Laws. To the best of the Mortgage Loan Seller's
knowledge, based upon a letter or letters from governmental
authorities, a legal opinion, an endorsement or endorsements to
the related title insurance policy, a representation of the
borrower at the time of origination of the Mortgage Loan or other
information acceptable to the Mortgage Loan Seller at the time of
such origination:
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(a) no improvements located on or forming a part of the Mortgaged
Property are in violation of any applicable zoning and
building laws or ordinances;
(b) the Mortgaged Property complies with all other laws and
regulations pertaining to its use and occupancy excluding
Environmental Laws (see (35) and (36) below) and all
applicable insurance requirements;
(c) the borrower has obtained all inspections, licenses, permits,
authorizations, and certificates necessary for such
compliance, including certificates of occupancy, if
available; and
(d) the Mortgage Loan Seller has not received notification from
any governmental authority that the Mortgaged Property
violates such laws or regulations or is being used, operated
or occupied unlawfully or that the borrower has failed to
obtain such inspections, licenses or certificates, except any
violation, unlawfulness or failure (A) which does not
materially and adversely affect the value of the Mortgaged
Property as security for the Mortgage Loan or the use for
which such Mortgaged Property was intended at the time of
origination, (B) which was specifically addressed by the
appraiser in the determination of the appraised value, or (C)
for which a reserve account held for the related Mortgage
Loan Seller has been established in an amount sufficient to
pay for the estimated costs to correct such violation.
(24) Title Insurance. The lien of the Mortgage is or will be insured by
an ALTA lender's title insurance policy or another state-approved
form of lender's title insurance policy issued in an amount not
less than the stated principal amount of the Mortgage Loan after
all advances of principal. The policy insures the Mortgage Loan
Seller and its successors and assigns that the Mortgage is a valid
first lien on the Mortgaged Property, subject only to exceptions
described in (13) above. If such a title insurance policy has not
yet been issued with respect to the Mortgage Loan, such a policy
is currently evidenced by a pro forma or specimen policy or by a
"marked-up" commitment for title insurance which was furnished by
the related title insurance company for purposes of closing the
Mortgage Loan. The premium for such title insurance policy has
been paid in full and such title insurance policy is or will be in
full force and effect, and upon endorsement and delivery of the
related promissory note to the Transferor and recording of the
assignment of mortgage in favor of the Transferor in the
applicable real estate records, such title insurance policy will
inure to the benefit of the Transferor. Such title insurance
policy (a) does not contain the standard general exceptions for
encroachments or boundary or other survey matters and for
easements not shown by the public records, other than such
exceptions as are customarily accepted by prudent commercial
mortgage lenders in the related jurisdiction, and (b) only
contains such exceptions for encroachments and boundary and other
survey matters as are customarily accepted by prudent commercial
mortgage lenders. The Mortgage Loan Seller and its agents have not
taken, or omit to take, any action that would materially impair
the coverage benefits of any such title insurance policy. Neither
the Mortgage Loan Seller nor any prior holder of the Mortgage has
made any claim under such title insurance policy.
(25) Insurance Related to Mortgaged Property. All improvements on the
Mortgaged Property are insured as follows:
(a) by a fire and extended perils insurance policy containing a
standard mortgagee clause naming the originator or Mortgage
Loan Seller and its successors as additional insureds
covering full replacement cost in an amount not less than the
lesser of (A) the full replacement cost of all improvements
to the Mortgaged Property, and (B) the outstanding principal
balance of the Mortgage Loan, but in any event in an amount
sufficient to avoid the operation of any co-insurance
provisions contained in the insurance policy;
(b) by an insurance policy providing business interruption or
rental continuation coverage in an amount not less than the
income anticipated from 12 months of operations of the
Mortgaged Property;
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(c) by a comprehensive general liability insurance policy in an
amount not less than $1 million per occurrence;
(d) if any material improvement on the Mortgaged Property is
located in an area identified by the Federal Emergency
Management Agency as having special flood hazards under the
National Flood Insurance Act of 1968, as amended, by a flood
insurance policy providing coverage in an amount not less
than the lesser of (A) the stated principal amount of the
promissory note, and (B) the maximum amount of insurance
available under the Flood Disaster Protection Act of 1973, as
amended; and
(e) by a workers' compensation insurance policy as required by
applicable law.
The insurance premium for each such insurance policy has been paid
or escrowed. Each such insurance policy contains a clause
providing that it is not terminable and may not be reduced without
30 days prior written notice to the mortgagee except that, in the
event of nonpayment of insurance premiums, each such insurance
policy provides for termination upon not less than 10 days prior
written notice. No such notice has been received by the Mortgage
Loan Seller. With respect to each such insurance policy, the
Mortgage Loan Seller has received a certificate of insurance or
similar document dated within the last 12 months stating that such
policy is in full force and effect. The Mortgage Loan Seller has
no knowledge of any action, omission, misrepresentation,
negligence or fraud which would result in the failure of any such
insurance policy. The Mortgage Loan Documents require the related
borrower or a tenant of such borrower to maintain each such
insurance policy at its expense, but authorizes the mortgagee to
maintain any such insurance policy at the borrower's expense upon
such borrower's or such tenant's failure to do (subject to any
applicable notice or cure period). The related Mortgage and
insurance policy require that any related insurance proceeds, in
excess of a specified amount, will be applied either to the repair
or restoration of all or part of the Mortgaged Property or to the
payment of the outstanding principal balance of or accrued
interest on the Mortgage Loan.
(26) UCC Financing Statements. One or more Uniform Commercial Code
financing statements have been filed or recorded, or have been
sent for filing or recording, wherever necessary to perfect under
applicable law a security interest in all furniture, fixtures,
equipment and other personal property, including rights under
leases and all agreements affecting the use, enjoyment or
occupancy of all or any part of the Mortgaged Property, (a) which
are collateral under the Mortgage or under a security or similar
agreement executed and delivered in connection with the Mortgage
Loan, and (b) in which a security interest can be perfected by the
filing of Uniform Commercial Code financing statement(s) under
applicable law.
(27) Default, Breach and Acceleration. The Mortgage Loan Seller knows
of no default, breach, violation or event of acceleration existing
under the Mortgage or the promissory note and no event, other than
failure to make 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 constitute a default, breach, violation or
event of acceleration. The Mortgage Loan Seller has no knowledge
that the borrower is a debtor in any state or federal bankruptcy
or insolvency proceeding.
(28) Customary Provisions. The promissory note and the Mortgage,
together with applicable state law, contain customary and
enforceable provisions which render the rights and remedies of the
holder thereof adequate for the practical realization against the
Mortgaged Property of the benefits of the security. Such remedies
include, but are not limited to, judicial or nonjudicial
foreclosure, subject to limitations to enforceability arising
under bankruptcy, insolvency, reorganization or other similar
laws, by general principles of equity or applicable
anti-deficiency laws or statutes.
(29) Access Routes. Surveys, title insurance reports, the title
insurance policy or other relevant documents indicate that at the
time of origination of the Mortgage Loan, (a) the related borrower
had sufficient rights with respect to amenities, ingress and
egress and similar matters identified in the appraisal as critical
to the appraised value of the Mortgaged Property, and (b) the
Mortgaged Property was receiving adequate services
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from public or private water, sewer and other utilities, none of
which are subject to revocation as a result of a foreclosure or
change in ownership of an adjacent property.
(30) Mortgage Loans Secured by Ground Lease but Not Fee Interest. If
the Mortgage Loan is secured in whole or in part by the related
borrower's interest as lessee under a ground lease of all or a
portion of the Mortgaged Property and the related fee interest in
the portion of the Mortgaged Property covered by the ground lease
is not subject or subordinate to the lien of the Mortgage:
(a) as of the date of the Closing of the Mortgage Loan, the
ground lease is in full force and effect, and the ground
lease or a memorandum thereof has been duly recorded in the
applicable real estate records and, to the knowledge of the
Mortgage Loan Seller (A) such ground lease does not prohibit
the interest of the related lessee from being encumbered by
the Mortgage, or a separate estoppel letter or written
agreement permitting such encumbrance has been obtained, and
(B) there have been no material changes in the terms of the
ground lease except as set forth in written instruments which
are part of the Mortgage File;
(b) except as may be indicated in the title insurance policy, the
lessee's leasehold interest in the portion of the Mortgaged
Property covered by the ground lease is not subject to any
liens or encumbrances superior to, or of equal priority with,
the Mortgage;
(c) the lessee's interest in the ground lease may be transferred
to the Transferor and its successors and assigns through
foreclosure of the Mortgage or conveyance in lieu of
foreclosure and, thereafter, may be transferred to another
Person by the mortgagee and its successors and assigns upon
notice to, but without the consent of, the lessor, provided
that the ground lease has not been terminated and all amounts
owed thereunder have been paid. Alternatively, if any such
consent is required, either (A) it has been obtained prior to
the date specified in the Underlying Mortgage Loan Purchase
Agreement, or (B) it is not to be unreasonably withheld;
(d) the lessor is required to give notice of any default under
the ground lease by the lessee to the mortgagee either under
the terms of the ground lease or under the terms of a
separate estoppel letter or written agreement;
(e) the mortgagee is entitled, under the terms of the ground
lease or a separate estoppel letter or written agreement, to
receive notice of any default by the lessee under the ground
lease, and after any such notice is entitled to not less than
the time provided to the lessee under the ground lease to
cure such default, which is curable during such period before
the lessor may terminate the ground lease. All rights of the
lessee 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;
(f) the currently effective term of the ground lease, excluding
any extension or renewal which is not binding on the lessor,
extends not less than 10 years beyond the Maturity Date of
the Mortgage Loan;
(g) the ground lease does not impose any restrictions on
subletting which the Mortgage Loan Seller considered to be
commercially unreasonable at the time of origination or
purchase of the Mortgage Loan;
(h) the Mortgage Loan Seller has not received any notice that (A)
the lessor under the ground lease is asserting a default by
the lessee or an event of default or (B) any event (other
than rental or other payments being due, but not yet
delinquent) has occurred which, with the passage of time or
the giving of notice would result in a default or an event of
default under the terms of the ground lease;
(i) the lessor has agreed that the ground lease may not be
amended, modified, cancelled or terminated without the prior
written consent of the Mortgage Loan Seller and that any such
action without such
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consent is not binding upon the mortgagee. The lessor is
required to enter into a new ground lease upon termination of
the ground lease for any reason, including rejection of the
ground lease in a bankruptcy proceeding; and
(j) under the terms of the ground lease and the Mortgage, any
related insurance proceeds or condemnation award for other
than a total or substantially total loss or taking will be
applied either to the payment of the outstanding principal
balance of and accrued interest on the Mortgage Loan or to
the repair or restoration of all or part of the Mortgaged
Property covered by the ground lease. The mortgagee or a
trustee appointed by it will have the right to hold and
disburse such proceeds as such repair or restoration
progresses, except where the Mortgage Loan provides that the
related borrower or its agent may hold and disburse such
proceeds with respect to any loss or taking less than a
stipulated amount not greater than $50,000.
(31) Deed of Trust. With respect to any Mortgage that is a deed of
trust or trust deed, a duly qualified trustee has either been
properly designated and currently serves or may be substituted in
accordance with applicable law. Except in connection with (a) a
trustee's sale after default by the borrower, or (b) the release
of the Mortgaged Property following the payment of the Mortgage
Loan in full, no fees or expenses are payable by the Mortgage Loan
Seller or the Transferor to such trustee.
(32) Cross-Security. The Mortgaged Property is not collateral or
security for the payment or performance of (a) any other
obligations owed to the originator or Mortgage Loan Seller other
than another Mortgage Loan being sold and assigned by the Mortgage
Loan Seller under the Underlying Mortgage Loan Purchase Agreement,
or (b) to the Mortgage Loan Seller's knowledge, any other
obligations owed to any Person other than the Mortgage Loan
Seller. The related promissory note is not secured by any property
other than a Mortgaged Property.
(33) Assignment of Leases, Rents and Profits. Unless the Mortgaged
Property is occupied by the borrower, the mortgage loan documents
include, either in the mortgage or in a separate document, an
assignment of leases, rents and profits or an assignment of
assignment of leases, rents and profits. The recording of any
assignment of leases, rents and profits incorporated within the
Mortgage or set forth in a separate mortgage loan document creates
a valid first priority assignment of, or security interest in, the
right to receive all payments, if any, due under the leases.
(34) REMIC.
(a) The Mortgage Loan is principally secured by an interest in
real property and either (A) the fair market value of such
real property was at least 80% of the adjusted issue price of
the Mortgage Loan on the date of origination or, if such
Mortgage Loan has been "significantly modified" within the
meaning of Section 1001 of the Tax Code, on the date of such
modification (unless such modification may be disregarded
under Treas. Reg. Sec. 1.860G-2(b)(3)), or (B) substantially
all of the proceeds of the Mortgage Loan were used to acquire
or improve or protect an interest in real property that, at
origination, was the only security for the Mortgage Loan;
(b) The Mortgage Loan contains no equity participation by the
Mortgage Loan Seller, and neither the promissory note nor the
Mortgage provides for any contingent or additional
participation interest in the cash flow or proceeds realized
on disposition of the Mortgaged Property; and
(c) the Mortgage Loan is a "qualified mortgage" as defined in,
and for purposes of, Section 860G of the Tax Code and
provides for the payments of interest at a fixed rate or at a
rate described in Treas. Reg. Sec. 1.806G-1(a)(3).
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(35) Environmental Site Assessments (ESAs). Subject to the exceptions
specified herein under "Description of the Mortgage Pool-Certain
Characteristics of the Mortgage Pool-Environmental Risks," the
ESAs, screen assessments, studies or updates prepared or obtained
in connection with the origination of the Mortgage Loan identified
no material adverse environmental conditions or circumstances
anticipated to require any material expenditure with respect to
the Mortgaged Property, except for:
(a) those cases where such conditions or circumstances were
investigated further and based upon such additional
investigation, a qualified environmental consultant
recommended no further investigation or remediation;
(b) those cases in which an operations and maintenance plan was
recommended by the environmental consultant and such plan was
obtained or an escrow reserve established to cover the
estimated costs of obtaining such plan;
(c) those conditions in which soil or groundwater contamination
was suspected or identified and either (A) such condition or
circumstance was remediated or abated prior to the date of
closing of the Mortgage Loan, (B) a "no further action"
letter was obtained from the applicable regulatory authority,
or (C) either an environmental insurance policy was obtained,
a letter of credit provided, an escrow reserve account
established, or an indemnity from the responsible party was
obtained, to cover the estimated costs of any required
investigation, testing, monitoring or remediation;
(d) those cases in which (A) a leaking underground storage tank
or groundwater contamination was identified to be located on
or to have originated from an offsite property, (B) a
responsible party has been identified under applicable law,
and (C) either such condition is not known to have affected
the Mortgaged Property or the responsible party has either
received a "no further action" letter from the applicable
regulatory agency, established a remediation fund, or
provided an indemnity or guaranty to the borrower; and
(e) cases in which, for small loans with an original principal
balance of less than $1,000,000, the borrower has
acknowledged in the Mortgage Loan Documents the existence of
such condition and expressly agreed to comply with all
federal, state and local statutes or regulations respecting
the such condition.
(36) Notice of Environmental Problem. Other than with respect to any
conditions identified in the ESAs, screen assessments, studies or
updates referred to in (35), the Mortgage Loan Seller:
(a) has not received actual notice from any federal, state or
other governmental authority of (A) any failure of the
Mortgaged Property to comply with any applicable
Environmental Laws, or (B) any known or threatened release of
Hazardous Materials on or from the Mortgaged Property in
violation of Environmental Laws;
(b) has not received actual notice from the borrower that, except
as set forth in 35(e) above, (A) such borrower has received
any such notice from any such governmental authority, (B) the
Mortgaged Property fails to comply with Environmental Laws,
or (C) such borrower has received actual notice that there is
any known or threatened release of Hazardous Materials on or
from the Mortgaged Property in violation of Environmental
Laws; and
(c) has no actual knowledge that (A) the Mortgaged Property fails
to materially comply with any applicable Environmental Law or
(B) there has been any known or threatened release of
Hazardous Materials on or from the Mortgaged Property where
such release falls outside of exceptions (A) through (E) of
(35) above.
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(37) Recourse. The Mortgage Loan Documents contain standard provisions
providing for recourse against the borrower or a principal of the
borrower for damages sustained in connection with the borrower's
fraud, material misrepresentation, misappropriation, willful
misconduct or waste (except in the case of ___ of the Mortgage
Loans, representing approximately % of the Initial Pool Balance)
of any tenant security deposits, rent, insurance proceeds or
condemnation proceeds. The Mortgage Loan Documents contain
provisions in which the borrower or a principal of the borrower
has agreed to indemnify the mortgagee for damages resulting from
violations of Environmental Laws.
(38) Leases. Prior to the origination of the Mortgage Loan, the
Mortgage Loan Seller obtained tenant estoppel certificates from
all tenants whose leases covered more than 10% (20% if the
Mortgage Loan has an original principal balance less than or equal
to $2,500,000) of the net leasable area of the Mortgaged Property;
and based upon such tenant estoppel certificates, no material
defaults with respect to any such lease existed as of the date of
the tenant estoppel certificate. The Mortgage Loan Seller has not
received any notice of the existence of any default under any such
lease or of the existence of any condition which, but for the
passage of time or the giving of notice would result in such a
default.
(39) Environmental Compliance. One or more of the mortgage loan
documents contains either (a) a representation, warranty or
covenant that the borrower will not use, cause or permit to exist
on the Mortgaged Property any Hazardous Materials in violation of
Environmental Law, or (b) an indemnity with respect to any such
violation in favor of the Mortgage Loan Seller.
(40) Inspection. The Mortgage Loan Seller has inspected or caused an
inspection of the Mortgaged Property within the 12 months
preceding the date of the Underlying Mortgage Loan Purchase
Agreement.
(41) Subordinate Debt. Except as disclosed in Annex A, the Mortgage
contains a provision for the acceleration of the payment of the
unpaid principal balance of the Mortgage Loan in the event that
the borrower encumbers the Mortgaged Property without the prior
written consent of the mortgagee as described above in this
prospectus supplement in the section titled "--Certain
Characteristics of the Mortgage Pool-Other Financing." Consent may
be withheld in the mortgagee's sole discretion.
(42) Common Ownership. No two properties securing Mortgage Loans are
directly or indirectly under common ownership except to the extent
that such common ownership and the ownership structure has been
specifically disclosed in Annex A.
(43) Operating or Financial Statement. The mortgage loan documents
require the borrower to furnish to the mortgagee at least annually
an operating statement with respect to the Mortgaged Property or,
in the case of a borrower-occupied Mortgaged Property, a financial
statement with respect to the borrower.
(44) Litigation. To the knowledge of the Mortgage Loan Seller, there is
no pending action, suit, proceeding, arbitration or governmental
investigation with respect to the borrower or the Mortgaged
Property which if determined adversely to the borrower would have
a material adverse effect on the value of the Mortgaged Property
or the borrower's ability to continue to perform its obligations
under the Mortgage Loan.
(45) Assisted Living Loans and Nursing Home Loans. With respect to each
Assisted Living Loan and each Nursing Home Loan, the Mortgage Loan
Seller represents and warrants that:
(a) to the knowledge of the Mortgage Loan Seller, each facility
operator or manager, the borrower, and the related facility
comply with all federal, state and local laws, regulations,
quality and safety standards, accreditation standards and
requirements of the applicable state department of health;
(b) each operator, manager, borrower and facility holds, in the
name of the borrower, all requisite licenses, permits,
regulatory agreements or other approvals necessary or
desirable for the use and operation of the facility, and such
licenses are in full force and effect, have not been
transferred to any location other than the related facility,
have not been pledged to secure any debt and are held
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free from conflicts and restrictions that would materially
impair the intended use or operation of the facility;
(c) to the knowledge of the Mortgage Loan Seller, the facility is
in compliance with all requirements for participation in
Medicare and Medicaid, is in compliance with all insurance,
reimbursement and cost reporting requirements and has a
current provider agreement which is in full force and effect;
(d) to the knowledge of the Mortgage Loan Seller, there is no
threatened or pending revocation, suspension, termination,
probation, restriction, limitation or nonrenewal affecting
the related operator, borrower or Mortgage Loan Seller or any
participation or provider agreement, and there is no
threatened or pending proceeding or investigation by any
governmental agency with respect to the operator, borrower or
Mortgage Loan Seller;
(e) to the knowledge of the Mortgage Loan Seller, no such
facility has committed a "Level A" or equivalent violation,
no statement of charges or deficiencies has been made or
penalty imposed, and no enforcement action has been
undertaken by any governmental agency against the facility,
operator or Mortgage Loan Seller or any officer, director or
stockholder thereof, within the three years preceding the
sale of such Mortgage Loan to the Transferor;
(f) to the knowledge of the Mortgage Loan Seller, there are no
current or pending Medicaid, Medicare or third-party payor's
program reimbursement audits or appeals pending with respect
to the facility;
(g) to the knowledge of the Mortgage Loan Seller, there are no
current or pending Medicaid, Medicare or third-party payor's
program recoupment efforts with respect to the facility;
(h) to the knowledge of the Mortgage Loan Seller, the borrower
has not pledged any accounts receivable relating to the
operations of the facility as security for any debt; and
(i) to the knowledge of the Mortgage Loan Seller, any existing
management agreement with respect to the operation of the
facility is in full force and effect and no party to such
agreement has defaulted or evidenced intent to terminate or
fail to renew such agreement. Pursuant to the terms of such
agreement and the relevant statutes and regulations, in the
event such agreement is terminated, the borrower, the Trustee
or any other successor manager of the facility need not
obtain a certificate of need prior to applying for or
receiving a license to operate the facility or receiving
payments from Medicare or Medicaid.
(46) ARD Loans. If the Mortgage Loan is an ARD Loan, it commenced
amortizing on its initial scheduled Due Date and provides that:
(a) The spread used in calculating its Mortgage Rate will
increase by no more than 5% in connection with the passage of
its Anticipated Repayment Date;
(b) its Anticipated Repayment Date is of the term specified in
Annex A and Annex B following the origination of the Mortgage
Loan;
(c) if it has not previously done so, the borrower is required to
enter into a "lockbox agreement" no later than the
Anticipated Repayment Date, whereby all revenue from the
Mortgaged Property shall be deposited directly into a
designated account controlled by the Servicer; and
(d) any cash flow from the Mortgaged Property that is applied to
amortize the Mortgage Loan following its Anticipated
Repayment Date shall, to the extent such net cash flow is in
excess of the Monthly Payment, be net of budgeted and
discretionary (servicer approved) capital expenditures.
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(47) Due-on-Sale. Subject to certain transfer rights allowed in
accordance with certain provisions set forth in the Mortgage
securing the Mortgage Loan, the Mortgage contains a "due-on-sale"
clause that provides for the acceleration of the payment of the
unpaid principal balance of the Mortgage Loan if, without the
prior written consent of the mortgagee, the borrower transfers or
sells the Mortgaged Property.
(48) SMMEA Qualification. Each Mortgage Loan was originated by a
savings and loan association, savings bank, commercial bank,
credit union, insurance company, or similar institution which is
supervised and examined by a Federal or State authority, or by a
mortgagee approved by the Secretary of Housing and Urban
Development pursuant to Sections 203 and 211 of the National
Housing Act.
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Prudential Securities Secured Financing Corporation, formerly known as
P-B Secured Financing Corporation (the "Depositor"), was incorporated in the
State of Delaware on August 26, 1988, as a wholly-owned, limited purpose finance
subsidiary of Prudential Securities Group Inc. (a wholly-owned indirect
subsidiary of The Prudential Insurance Company of America). The Depositor's
principal executive offices are located at One New York Plaza, New York, New
York 10292, Attention: David Rodgers. Its telephone number is (212) 214-1000.
The Depositor does not have, nor is it expected in the future to have, any
significant assets.
PRUDENTIAL SECURITIES CREDIT CORP.
Prudential Securities Credit Corp. (the "Transferor"), was incorporated
in the State of Delaware on May 13, 1988, as a wholly-owned, limited purpose
finance subsidiary of Prudential Securities Group Inc. (a wholly-owned indirect
subsidiary of The Prudential Insurance Company of America). The Transferor's
principal executive offices are located at One New York Plaza, New York, New
York 10292, Attention: ___________. Its telephone number is (212) 214-1000.
MORTGAGE LOAN SELLERS
The Depositor will purchase the Mortgage Loans to be included in the
Mortgage Pool on or before the Closing Date from the Transferor pursuant to the
Mortgage Loan Purchase Agreement. The Transferor will have purchased such
Mortgage Loans from the Mortgage Loan Sellers pursuant to the Underlying
Mortgage Loan Purchase Agreements.
[Provide information]
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of [15] Classes to be designated as the Class A-1,
Class A-2, Class A-EC, Class B, Class C, Class D, Class E, Class F, Class G,
Class H, Class J, Class K, Class L, Class M and Class N Certificates. Only the
Class A-1, Class A-2, Class B, Class C, Class D and Class E Certificates are
offered hereby. The initial Certificate 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.
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The Pooling and Servicing Agreement will be included as part of the
Form 8-K to be filed with the SEC within 15 days after the Closing Date. For
more detailed information regarding the terms of the Pooling and Servicing
Agreement and the Certificates, you should refer to the sections in this
prospectus supplement titled "The Pooling and Servicing Agreement" and to the
section in the prospectus titled "Description of the Certificates" and
"Servicing of the Mortgage Loans."
The Certificates represent in the aggregate the entire beneficial
ownership interest in a Trust Fund consisting primarily of:
(1) the Mortgage Loans, all scheduled payments of interest and
principal due after the Cut-off Date (whether or not received) 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);
(2) any REO Property;
(3) such funds or assets as from time to time are deposited in the
Collection Account, the Distribution Account and any account
established in connection with REO Properties (an "REO Account");
(4) the rights of the mortgagee under all insurance policies with
respect to the Mortgage Loans;
(5) the Depositor's rights and remedies under the Mortgage Loan
Purchase Agreement, including rights with respect to enforcement
of repurchase obligations of the Mortgage Loan Sellers in
connection with any breaches of representations and warranties
concerning the Mortgage Loans pursuant to the Underlying Mortgage
Loan Purchase Agreements; and
(6) all of the related mortgagee's right, title and interest in the
Reserve Accounts.
The Certificate Balance of any Class of Certificates outstanding at any
time represents the maximum amount that 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. The respective
Certificate Balance of each Class of Certificates will in each case be reduced
by amounts actually distributed on such Class that are allocable to principal
and by any Realized Losses allocated to such Class. The Class A-EC Certificates
are interest only Certificates, have no Certificate Balances and are not
entitled to distributions in respect of principal.
DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Regular Certificates
will be made on the ____ day of each month or, if such day is not a Business
Day, then on the next succeeding Business Day, commencing on _______________,
provided that no such day shall be fewer than four Business Days after the
related Determination Date (each, a "Distribution Date"). All distributions
(other than the final distribution on any Certificate) will be made by the
Trustee to the persons in whose names the Certificates are registered at the
close of business on the last Business Day of the month preceding the month in
which such Distribution Date occurs (the "Record Date"). Such distributions will
be made (1) by wire transfer of immediately available funds to the account
specified by the related Certificateholder at a bank or other entity having
appropriate facilities for such transfer, if such Certificateholder (a) is DTC
or its nominee or (b) provides the Trustee with wiring instructions no less than
five Business Days prior to the related Record Date and is the registered owner
of Certificates with an aggregate Certificate Balance or Notional Balance of at
least $25,000, or otherwise (2) by check mailed to such Certificateholder. The
final distribution on any Certificate will be made in like manner, but only upon
presentation or surrender of such Certificate at the location specified in the
notice to the holder thereof of such final distribution. The "Class A-EC
Notional Balance" as of any date is equal to the sum of the Certificate Balances
of the Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F, Class
G, Class H, Class J, Class K, Class L, Class M and Class N Certificates.
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The aggregate distribution to be made on the Regular Certificates on
any Distribution Date will equal the Available Funds. The "Available Funds" for
a Distribution Date will be the sum of all previously undistributed Monthly
Payments or other receipts on account of principal of and interest on or in
respect of the Mortgage Loans (including Unscheduled Payments and Net REO
Proceeds, if any) received by the Master Servicer during the related Collection
Period, all P&I Advances made in respect of such Distribution Date, and all
other amounts required to be placed in the Collection Account by the Master
Servicer (including any Appraisal Reduction Excess Collections). "Available
Funds" does not include the Following:
(1) the Trustee Fee payable for the related Collection Period (which
amount will be paid to the Trustee prior to any other allocations
or distributions on each Distribution Date);
(2) amounts used to reimburse the Master Servicer or the Trustee, as
applicable, for previously unreimbursed Advances and interest
thereon;
(3) the Servicing Fee, Special Servicing Fee, Disposition Fee, Workout
Fee and other compensation due to the Master Servicer and Special
Servicer with respect to each Mortgage Loan;
(4) all amounts used to pay late fees, late charges and similar fees,
"insufficient funds" check charges, loan modification fees,
extension fees, loan service transaction fees, demand fees,
beneficiary statement charges, assumption fees and similar fees,
which the Master Servicer or the Special Servicer, as applicable,
is entitled to retain as additional servicing compensation;
(5) all amounts representing scheduled Monthly Payments due after the
Due Date in the related Collection Period (such amounts to be
treated as received on the Due Date when due);
(6) other amounts payable to the Master Servicer or Special Servicer
(collectively referred to as "Liquidation Proceeds") in respect of
unpaid servicing compensation from:
(a) amounts received in connection with the sale or liquidation
of Specially Serviced Mortgage Loans, by foreclosure,
trustee's sale or otherwise;
(b) amounts (other than Insurance Proceeds) received in
connection with the taking of a Mortgaged Property by
exercise of the power of eminent domain or condemnation
("Condemnation Proceeds"); or
(c) proceeds of insurance policies to the extent not applied to
the restoration of the Mortgaged Property or released to the
borrower in accordance with the normal servicing procedures
of the Master Servicer or the related sub-servicer and the
terms and conditions of the related Mortgage and promissory
note ("Insurance Proceeds");
(7) all amounts representing reimbursable expenses of the Master
Servicer, the Special Servicer or the Trustee and amounts
permitted to be retained by the Master Servicer or the Special
Servicer or withdrawn by the Master Servicer from the Collection
Account to cover such expenses;
(8) Prepayment Premiums, Yield Maintenance Charges and Excess Interest
received in the related Collection Period, which are to be
distributed separately as described herein;
(9) interest or investment income with respect to funds on deposit in
the Collection Account, Reserve Accounts or Advance Payment
Account; and
(10) Default Interest received in the related Collection Period with
respect to a Mortgage Loan that is in default with respect to its
Balloon Payment.
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"Class Interest Distribution Amount" with respect to any Distribution
Date and each class of Certificates other than the Residual Certificates is the
amount of interest accrued on the Certificate Balance or Notional Balance of
such Class during the related Interest Accrual Period at the applicable
Pass-Through Rate.
Allocations of Appraisal Reductions and Realized Losses on the
Distribution Date occurring during any Interest Accrual Period will be deemed to
have been made as of the first day of such Interest Accrual Period for purposes
of determining any Class Interest Distribution Amount. Notwithstanding the
foregoing, the Class Interest Distribution Amount for each Class of Certificates
otherwise calculated as described above will be reduced by such Class' pro rata
share of any Prepayment Interest Shortfall not offset by Prepayment Interest
Surplus (determined pro rata according to each Class Interest Distribution
Amount without regard to this sentence).
"Class Interest Shortfall" for any Class of Certificates on any
Distribution Date means the excess, if any, of the amount of interest required
to be distributed to the holders of such Class of Certificates on such
Distribution Date over the amount of interest actually distributed to such
holders. No interest will accrue on unpaid Class Interest Shortfalls.
The "Collection Period," with respect to a Distribution Date, is the
period beginning on the day following the Determination Date in the month
preceding the month in which such Distribution Date occurs (or, in the case of
the Distribution Date occurring in ________________, on the day after the
Cut-off Date) and ending on the Determination Date in the month in which such
Distribution Date occurs.
The "Default Rate," with respect to any Mortgage Loan, is the annual
rate at which interest accrues on such Mortgage Loan following any event of
default on such Mortgage Loan, including a default in the payment of a Monthly
Payment or a Balloon Payment.
The "Interest Accrual Period" with respect to any Distribution Date is
the calendar month preceding the month in which such Distribution Date occurs.
Interest for each Interest Accrual Period is calculated based on a 360-day year
consisting of twelve 30-day months.
The "Monthly Payment" with respect to any Mortgage Loan for any
Distribution Date (other than any REO Mortgage Loan) is the scheduled monthly
payment of principal and interest, excluding any Balloon Payment, that is
payable by the related borrower on the related Due Date. The Monthly Payment
with respect to an REO Mortgage Loan for any Distribution Date is the monthly
payment that would otherwise have been payable on the related Due Date had the
related Mortgage Loan not been discharged (after giving effect to any extension
or other modification), determined as set forth in the Pooling and Servicing
Agreement.
The "Net Mortgage Rate" for each Mortgage Loan is the Mortgage Rate for
such Mortgage Loan in the absence of a default and exclusive of Excess Interest,
minus the related Servicing Fee Rate and the Trustee Fee Rate.
"Net REO Proceeds," with respect to any REO Property and any related
Mortgage Loan, are all revenues received by the Special Servicer with respect to
such REO Property or REO Mortgage Loan that are not Liquidation Proceeds, net of
any insurance premiums, taxes, assessments and other costs and expenses
permitted to be paid from the related REO Account pursuant to the Pooling and
Servicing Agreement.
The "Pass-Through Rate" for any Class of Regular Certificates is the
per annum rate at which interest accrues on the Certificates of such Class
during any Interest Accrual Period, and is set forth under "Summary" herein.
The "Pooled Principal Distribution Amount" for any Distribution Date
will be equal to the sum (without duplication) of:
(1) the principal component of all scheduled Monthly Payments (other
than Balloon Payments) that become due on the Mortgage Loans
during the related Collection Period regardless of whether
received;
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(2) the principal component of all Assumed Scheduled Payments, as
applicable, deemed to become due during the related Collection
Period with respect to any Balloon Loan that is delinquent in
respect of its Balloon Payment regardless of whether received;
(3) the Scheduled Principal Balance of each Mortgage Loan that was,
during the related Collection Period, repurchased from the Trust
Fund in connection with the breach of a representation or warranty
or an early termination of the Trust Fund as described under
"Early Termination";
(4) the portion of Unscheduled Payments allocable to principal of any
Mortgage Loan that was liquidated during the related Collection
Period;
(5) the principal component of any Balloon Payment received during the
related Collection Period;
(6) all Principal Prepayments received in the related Collection
Period; and
(7) all full or partial recoveries in respect of principal, including
Insurance Proceeds, Liquidation Proceeds, Condemnation Proceeds
and Net REO Proceeds.
"Prepayment Interest Shortfall" means the amount of interest a borrower
is not required to pay or does not pay because of a Principal Prepayment thereby
made during any Collection Period relative to the amount of interest that would
have accrued on the Mortgage Loan during such Collection Period in the absence
of such Principal Prepayment. Prepayment Interest Shortfalls not offset as
provided in the following two sentences will be allocated to each Class of
Certificates pro rata based on such Class's Class Interest Distribution Amount
(without taking into account the amount of Prepayment Interest Shortfalls to
such Class on the relevant Distribution Date). Any Prepayment Interest Shortfall
with respect to a Distribution Date will be offset first by the amount of any
Prepayment Interest Surplus and then up to an amount equal to the aggregate
Servicing Fees to which the Master Servicer would otherwise be entitled on such
Distribution Date. If the Master Servicer and the Special Servicer are the same
person, any remaining Prepayment Interest Shortfall after the application of the
prior sentence will be offset by the aggregate Special Servicing Fees, Workout
Fees and Disposition Fees to which the Special Servicer would otherwise be
entitled on such Distribution Date.
"Prepayment Interest Surplus" with respect to any Principal Prepayment
means the amount by which (a) interest received from the related borrower in
respect of such Mortgage Loan during such Collection Period exceeds interest at
the related Net Mortgage Rate on the Scheduled Principal Balance of such
Mortgage Loan that would have been due in the absence of such Principal
Prepayment. The Master Servicer will be entitled to retain any Prepayment
Interest Surplus as additional servicing compensation to the extent not required
to offset Prepayment Interest Shortfalls as described in the preceding
paragraph.
"Prepayment Premiums" are payments received on a Mortgage Loan in
connection with a Principal Prepayment thereon, calculated as a fixed percentage
of the amount of principal to be prepaid.
"Principal Prepayments" are payments of principal made by a borrower on
a Mortgage Loan that are received in advance of the scheduled Due Date for such
payments and that are not accompanied by an amount of interest representing the
full amount of scheduled interest due on any date or dates in any month or
months subsequent to the month of prepayment.
Priorities. As used below in describing the priorities of distribution
of Available Funds for each Distribution Date, the terms set forth below will
have the following meanings.
An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property.
"Unscheduled Payments" are all Liquidation Proceeds, Condemnation
Proceeds and Insurance Proceeds payable under the Mortgage Loans, the Repurchase
Prices of any Mortgage Loans that are repurchased or purchased pursuant to the
Pooling and Servicing Agreement and any other payments under or with respect to
the Mortgage Loans not scheduled to be made, including Principal Prepayments,
but excluding Prepayment Premiums, Yield Maintenance Charges and Excess
Interest.
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The "Weighted Average Net Mortgage Rate" for any Interest Accrual
Period is a per annum rate equal to the weighted average of the amount of
interest accrued on the Mortgage Loans at the related Mortgage Rates during the
related Interest Accrual Period, weighted on the basis of the Scheduled
Principal Balances thereof as of the first day of such Interest Accrual Period.
On each Distribution Date, holders of each Class of Certificates will
receive distributions, up to the amount of Available Funds, in the amounts and
in the order of priority (the "Available Funds Allocation") set forth below:
(1) concurrently, to the Class A-1, Class A-2 and Class A-EC
Certificates, pro rata based on their Class Interest Distribution
Amounts, up to their Class Interest Distribution Amounts plus any
unpaid Class Interest Shortfalls previously allocated to such
Class,
(2) to the Class A-1 and Class A-2 Certificates, in reduction of the
Certificate Balances thereof until reduced to zero, the remaining
Pooled Principal Distribution Amount for such Distribution Date in
sequential order based on their alphabetical class designations;
(3) to the Class A-1 and Class A-2 Certificates, pro rata, based on
the amount of unreimbursed Realized Losses previously allocated
thereto, from remaining Available Funds;
(4) to the Class B Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(5) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class B Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(6) to the Class B Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(7) to the Class C Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(8) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class C Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(9) to the Class C Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(10) to the Class D Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(11) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class D Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(12) to the Class D Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(13) to the Class E Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
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(14) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class E Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(15) to the Class E Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(16) to the Class F Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(17) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class F Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(18) to the Class F Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(19) to the Class G Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(20) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class G Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(21) to the Class G Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(22) to the Class H Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(23) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class H Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(24) to the Class H Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(25) to the Class J Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(26) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class J Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(27) to the Class J Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(28) to the Class K Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(29) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class K Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
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(30) to the Class K Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(31) to the Class L Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(32) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class L Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(33) to the Class L Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(34) to the Class M Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(35) after the Certificate Balances of the Classes with earlier
alphabetical class designations have been reduced to zero, to the
Class M Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(36) to the Class M Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class;
(37) to the Class N Certificates, up to its Class Interest Distribution
Amount plus unpaid Class Interest Shortfalls previously allocated
to such Class;
(38) after the Certificate Balance of each class with an earlier
alphabetical class designation has been reduced to zero, to the
Class N Certificates, in reduction of the Certificate Balance
thereof until reduced to zero, the remaining Pooled Principal
Distribution Amount;
(39) to the Class N Certificates the remaining Available Funds up to
the amount of any unreimbursed Realized Losses previously
allocated to such Class; and
(40) any remaining funds shall be distributed to the Class R-I
Certificates.
Additional Master Servicer or Special Servicer compensation, interest
on Advances, extraordinary expenses of the Trust Fund and other similar items
will create a shortfall in Available Funds, which generally will result in a
Class Interest Shortfall for the class then outstanding with the latest
alphabetical class designation.
Distributions of Principal After Senior Principal Distribution
Cross-Over Date. Notwithstanding the foregoing, on each Distribution Date on and
after the Senior Principal Distribution Cross-Over Date, and on the final
Distribution Date in connection with the termination of the Trust Fund, all
distributions of principal to the Class A-1 and A-2 Certificates will be paid to
holders of such Classes of Certificates, pro rata based on their outstanding
Certificate Balances immediately prior to such Distribution Date, until the
Certificate Balance of each such Class is reduced to zero.
The "Senior Principal Distribution Cross-Over Date" will be the first
Distribution Date on which the aggregate Certificate Balance of the Class A-1
and A-2 Certificates (before any distributions are made) exceeds the sum of (a)
the aggregate Scheduled Principal Balance of all Mortgage Loans on such
Distribution Date and (b) the portion of the Available Funds that will remain
after the required distributions of interest to be made to such classes on such
Distribution Date.
Yield Maintenance Charges and Prepayment Premiums. Yield Maintenance
Charges collected during any Collection Period will be allocated as between the
Class A-EC Certificates and all other eligible Classes based on the Base
Interest Fraction. The product of the Base Interest Fraction and the aggregate
amount of such Yield Maintenance Charges will be allocated for distribution to
Classes entitled to receive principal distributions on the related Distribution
Date. The product of
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(a) the amount of principal distributed to each Class (other than the Class A-EC
Certificates) as a percentage of the principal distributed to all such Classes
multiplied by (b) the Base Interest Fraction and multiplied by (c) the amount of
Yield Maintenance Charges allocated to such Classes will be distributed to each
such Class. The remainder of such Yield Maintenance Charges will be distributed
to the Class A-EC Certificates.
____________ percent of the Prepayment Premiums collected during any
Collection Period will be allocated for distribution to Classes entitled to
receive principal distributions on the related Distribution Date on a pro rata
basis, based on the amount of principal distributed to each such Class as a
percentage of the amount of principal distributed to all such classes. The
remainder of such Prepayment Premiums will be allocated to the Class A-EC
Certificates.
The "Base Interest Fraction" with respect to any principal prepayment
on any Mortgage Loan and with respect to any class of Certificates is a fraction
(a) whose numerator is the amount, if any, by which (1) the Pass-Through Rate on
such Class of Certificates exceeds (2) 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 (1) Mortgage Rate on such
Mortgage Loan exceeds (2) 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 (a) the
Mortgage Rate on such Mortgage Loan and (b) the related Pass-Through Rate, 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 J, Class K, Class L, Class M,
Class N or Residual Certificates. Instead, after the Certificate Balances of the
Class A-1, Class A-2, 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-EC Certificates. For a more detailed
description of Prepayment Premiums and Yield Maintenance Charges, you should
refer to the section in this prospectus supplement titled "Description of the
Mortgage Pool--Certain Terms and Provisions of the Mortgage Loans--Prepayment
Provisions" and to the section in the prospectus titled "Certain Legal Aspects
of the Mortgage Loans--Enforceability of Certain Provisions--Prepayment
Provisions."
Prepayment Premiums will be distributed on any Distribution Date only
to the extent they are received in respect of the Mortgage Loans in the related
Collection Period.
Default Interest with Respect to Balloon Payments. Default Interest
received with respect to a Mortgage Loan that is in default with respect to its
Balloon Payment will be distributed on such Distribution Date to the holders of
the Class of Certificates that is entitled to distributions of principal on such
Distribution Date; provided that if more than one Class of Certificates is
entitled to distributions of principal on such Distribution Date, the amount of
such Default Interest will be allocated among such Classes pro rata, based on
their respective Certificate Balances immediately prior to such Distribution
Date.
Realized Losses. Realized Losses on Mortgage Loans included in the
Mortgage Pool will be allocated to the outstanding class of Certificates with
the latest alphabetical class designation (other than the Residual Certificates
and Class A-EC Certificates) in reverse sequential order, until the Certificate
Balance thereof is reduced to zero. However, on and after the Senior Principal
Distribution Cross-Over Date, Realized Losses will be allocated among the Class
A-1 and Class A-2 Certificates on a pro rata basis. Realized Losses allocated to
any class of Certificates other than the Residual Certificates will reduce the
Class A-EC Notional Balance.
As referred to herein, the "Realized Loss" with respect to any
Distribution Date will mean the amount, if any, by which (1) the aggregate
Certificate Balance after giving effect to distributions made on such
Distribution Date, exceeds (2) the aggregate Scheduled Principal Balance of the
Mortgage Loans as of the Due Date in the month in which such Distribution Date
occurs. Any amounts recovered in respect of any amounts previously written off
as Realized Losses will be distributed to the Classes of Certificates in reverse
order of allocation of Realized Losses thereto.
Available Funds will be reduced by the aggregate amount of any
indemnification payments made from amounts comprising assets of the Trust Fund
to any person under the Pooling and Servicing Agreement. Such reduction of
amounts otherwise distributable to a Class shall be allocated first in respect
of interest and second in respect of principal but shall not be
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reimbursable and so shall not create Class Interest Shortfalls and shall not
constitute Realized Losses. For more detailed information, you should refer to
the section in the prospectus titled "Servicing of the Mortgage Loans-Certain
Matters With Respect to the Master Servicer, the Special Servicer, the Trustee
and the Depositor."
The "Scheduled Principal Balance" of any Mortgage Loan as of any Due
Date will be the principal balance of such Mortgage Loan as of such Due Date,
after giving effect to (1) any Principal Prepayments, prepayments that do not
include prepayment premiums or other unscheduled recoveries of principal and any
Balloon Payments received during the related Collection Period and (2) any
payment in respect of principal due on or before such Due Date (excluding
Balloon Payments, but including the principal portion of any Assumed Scheduled
Payment), irrespective of any delinquency in payment by the borrower. The
Scheduled Principal Balance of any REO Mortgage Loan as of any Due Date is equal
to the principal balance thereof outstanding on the date that the related
Mortgaged Property became an REO Property minus any Net REO Proceeds allocated
to principal and minus the principal component of Monthly Payments due thereon
on or before such Due Date. With respect to any Mortgage Loan, from and after
the date on which the Master Servicer makes a determination that it has
recovered all amounts that it reasonably expects to be finally recoverable (a
"Final Recovery Determination"), the Scheduled Principal Balance thereof will be
zero.
SCHEDULED FINAL DISTRIBUTION DATE
The "Scheduled Final Distribution Date" with respect to any Class of
Certificates is the Distribution Date on which the aggregate Certificate Balance
or aggregate Notional Balance, as the case may be, 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:
CLASS SCHEDULED FINAL DISTRIBUTION DATE
----- ---------------------------------
Class A-1
Class A-2
Class B
Class C
Class D
Class E
The Scheduled Final Distribution Dates set forth above were calculated
without regard to any delays in the collection of Balloon Payments and without
regard to a reasonable 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 any class of Certificates may be
later, and could be substantially later, than the related Scheduled Final
Distribution Date.
In addition, the Scheduled Final Distribution Dates set forth above
were calculated assuming no prepayments (involuntary or voluntary), no exercise
of defeasance options, no Early Termination, no defaults, no condemnations, no
modifications, no extensions and payment in full of ARD Loans on the related
Anticipated Repayment Dates. Since the rate of payment (including prepayments)
of the Mortgage Loans can be expected to exceed the scheduled rate of payments,
and could exceed such scheduled rate by a substantial amount, the actual final
Distribution Date for any class of Certificates may be earlier, and could be
substantially earlier, than the related scheduled Final Distribution Date.
ADDITIONAL RIGHTS OF THE RESIDUAL CERTIFICATES
The Residual Certificates will remain outstanding for as long as the
Trust Fund exists. Holders of the Residual Certificates are not entitled to
regular or scheduled distributions in respect of principal, interest, Prepayment
Premiums, Yield
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Maintenance Charges or Excess Interest. Holders of the Residual Certificates are
not expected to receive any distributions until after the Certificate Balances
of all other Classes of Certificates have been reduced to zero, and then will
receive distributions only to the extent of any Available Funds remaining on any
Distribution Date and any remaining assets of the REMICs.
EARLY TERMINATION
The holder of the Class R-I Certificates representing greater than a
50% Percentage Interest of the Class R-I Certificates, and, if such holder does
not exercise this option, the Master Servicer and, if the Master Servicer does
not exercise this option, the Depositor, will have the option to purchase all of
the Mortgage Loans and all property remaining in the Trust Fund on any
Distribution Date on which the aggregate Scheduled Principal Balance of the
Mortgage Loans remaining in the Trust fund is less than 1% of the Initial Pool
Balance. Any such purchase would effect an early termination of the Trust Fund
and early retirement of the outstanding Certificates. The purchase price payable
upon the exercise of such option on such a Distribution Date will be an amount
equal to the greater of:
(1) the sum of (a) 100% of the outstanding principal balance of each
Mortgage Loan included in the Trust Fund as of the last day of the
month preceding such Distribution Date (less any Advances
previously made on account of principal); (b) the fair market
value of all other property included in the Trust Fund as of the
last day of such preceding months, as determined by an independent
appraiser no more than 30 days prior to the last day of such
month; (c) all unpaid interest accrued on such principal balance
of each such Mortgage Loan (including any REO Mortgage Loan) at
the Mortgage Rate to the last day of such month (less any Advances
previously made on account of interest); and (d) unreimbursed
Advances with interest thereon at the Advance Rate, unpaid
servicing compensation and unpaid Trust Fund expenses; or
(2) the aggregate fair market value of the Mortgage Loans and all
other property acquired in respect of any Mortgage Loan in the
Trust Fund, on the last day of the month preceding such
Distribution Date, as determined by an independent appraiser no
more than 30 days prior to the last day of such month together
with one month's interest thereon at the related Mortgage Rate,
plus disposition expenses.
Under the circumstances described under "Description of the Mortgage
Pool-Certain Terms and Conditions of the Mortgage Loans-Excess Interest," the
holders of 100% of the Class N Certificates or the Special Servicer will have
the option to purchase any ARD Loan on or after its Anticipated Repayment Date
at a price equal to its outstanding Scheduled Principal Balance plus accrued and
unpaid interest and unreimbursed Advances made with respect thereto (with
interest thereon). The exercise of this option may accelerate repayment of
certain Certificates, but is not expected to result in repayment of all Classes
on the same Distribution Date.
DELIVERY, FORM AND DENOMINATION
Book-Entry Certificates. No Person acquiring an Offered Certificate
other than a Class A-EC Certificate (a "Book-Entry Certificate") will be
entitled to receive a physical certificate, except under the limited
circumstances described below. Absent such circumstances, the Book-Entry
Certificates will be registered in the name of a nominee of DTC and beneficial
interests therein will be held by investors ("Beneficial Owners") through the
book-entry facilities of DTC, as described herein, in denominations of $25,000
initial Certificate Balance or Notional Balance and integral multiples of $1.00
in excess thereof. One certificate of each such Class may be issued that
represents a different initial Certificate Balance or Notional Balance to
accommodate the remainder of the initial Certificate Balance or Notional Balance
of such Class. The Depositor has been informed by DTC that its nominee will be
Cede & Co. Accordingly, Cede & Co. is expected to be the holder of record of the
Book-Entry Certificates.
No Beneficial Owner of a Book-Entry Certificate will be entitled to
receive a definitive Certificate (a "Definitive Certificate") representing such
person's interest in the Book-Entry Certificates except as set forth below.
Unless and until Definitive Certificates are issued to Beneficial Owners in
respect of the Book-Entry Certificates under the limited circumstances described
herein, all references to actions taken by Certificateholders or holders will,
in the case of the Book-Entry Certificates, refer to actions taken by DTC upon
instructions from its participants, and all references herein to distributions,
notices, reports and statements to Certificateholders or holders will, in the
case of the Book-Entry Certificates, refer to distributions, notices, reports
and statements to DTC or Cede & Co., as the case may be, for distribution to
Beneficial Owners in accordance with
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DTC procedures. DTC may discontinue providing its services as securities
depository with respect to the Book-Entry Certificates at any time by giving
reasonable notice to the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, certificates are required to be
printed and delivered. The Trustee, the Master Servicer, the Special Servicer
and the Certificate Registrar may for all purposes, including the making of
payments due on the Book-Entry Certificates, deal with DTC as the authorized
representative of the Beneficial Owners with respect to such Certificates.
The Depository Trust Company ("DTC") is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to Section
17A of the Securities Exchange Act of 1934, as amended. DTC was created to hold
securities for its participating organizations ("Participants") and to
facilitate the clearance and settlement of securities transactions among
Participants through electronic computerized book-entry charges in Participants'
accounts, thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers (including the Underwriter),
banks, trust companies and clearing corporations and certain other
organizations. The Rules applicable to DTC and its participants are on file with
the Securities and Exchange Commission. Indirect access to the DTC system also
is available to banks, brokers, dealers, trust companies and other institutions
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc.
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
Beneficial Owner is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Book-Entry Certificates are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
the Certificates except in the event that use of the book-entry system for the
Book-Entry Certificates is discontinued. Neither the Certificate Registrar nor
the Trustee will have any responsibility to monitor or restrict the transfer of
ownership interests in Book-Entry Certificates through the book-entry facilities
of DTC.
To facilitate subsequent transfers, all Book-Entry Certificates
deposited by Participants with DTC are registered in the name of DTC's
partnership nominee, Cede & Co. The deposit of Book-Entry Certificates with DTC
and their registration in the name of Cede & Co. effect no change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the
Book-Entry Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Book-Entry Certificates are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Beneficial Owners will not be recognized as Certificateholders, as such term is
used in the Pooling and Servicing Agreement, by the Trustee or any paying agent
(each, a "Paying Agent") appointed by the Trustee. Beneficial Owners will be
permitted to exercise the rights of Certificateholders only indirectly through
DTC and its Participants.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners, will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Beneficial
Owner to pledge Book-Entry Certificates to persons or entities that do not
participate in the DTC system, or to otherwise act with respect to such
Book-Entry Certificates, may be limited due to lack of a definitive Certificate
for such Book-Entry Certificates. In addition, under a book-entry format,
Beneficial Owners may experience delays in their receipt of payments, since
distributions will be made by the Trustee or a Paying Agent on behalf of the
Trustee to Cede & Co., as nominee for DTC.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Book-Entry Certificates. Under its usual procedures, DTC mails an Omnibus Proxy
to the Trustee as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Securities are credited on that
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record date (identified in a listing attached to the Omnibus Proxy). DTC may
take conflicting actions with respect to Percentage Interests or Voting Rights
to the extent that Participants whose holdings of Book-Entry Certificates
evidence such Percentage Interests or Voting Rights authorize divergent action.
Neither the Depositor, the Trustee, the Master Servicer, the Special
Servicer nor any Paying Agent will have any responsibility for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests of the Book-Entry Certificates registered in the name of Cede & Co.,
as nominee for DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests. In the event of the insolvency
of DTC, a Participant or an Indirect Participant in whose name Book-Entry
Certificates are registered, the ability of the Beneficial Owners of such
Book-Entry Certificates to obtain timely payment may be impaired. In addition,
in such event, if the limits of applicable insurance coverage by the Securities
Investor Protection Corporation are exceeded or if such coverage is otherwise
unavailable, ultimate payment of amounts distributable with respect to such
Book-Entry Certificates may be impaired.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Depositor believes to be
reliable, but the Depositor takes no responsibility for the accuracy thereof.
Physical Certificates. Book-Entry Certificates will be converted to
Definitive Certificates and reissued to Beneficial Owners or their nominees,
rather than to DTC or its nominee, only if (1) (a) the Depositor advises the
Certificate Registrar in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Depository with respect to any Class
of the Book-Entry Certificates and (b) the Depositor is unable to locate a
qualified successor or (2) the Depositor, at its option, advises the Trustee and
Certificate Registrar that it elects to terminate the book-entry system through
DTC with respect to any Class of the Book-Entry Certificates.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Certificate Registrar will be required to notify all affected
Beneficial Owners through DTC of the availability of Definitive Certificates.
Upon surrender by DTC of the physical certificates representing the affected
Book-Entry Certificates and receipt of instructions for re-registration, the
Certificate Registrar will reissue the Book-Entry Certificates as Definitive
Certificates to the Beneficial Owners. Upon the issuance of Definitive
Certificates for purposes of representing ownership of the Certificates
originally issued as Book-Entry Certificates, the registered holders of such
Definitive Certificates will be recognized as Certificateholders under the
Pooling and Servicing Agreement and, accordingly, will be entitled directly to
receive payments on, and exercise Voting Rights with respect to, and to transfer
and exchange such Definitive Certificates.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee or the Certificate Registrar in accordance with the terms
of the Pooling and Servicing Agreement.
REGISTRATION AND TRANSFER
The holder of any Definitive Certificate may transfer or exchange the
same in whole or part (subject to the minimum authorized denomination) at the
corporate trust office of the certificate registrar appointed pursuant to the
Pooling and Servicing Agreement (the "Certificate Registrar") or at the office
of any transfer agent. In exchange for any Definitive Certificate properly
presented for transfer or exchange with all necessary accompanying
documentation, the Certificate Registrar will, within five Business Days of such
request if made at the corporate trust office of the Certificate Registrar, or
within ten Business Days if made at the office of another transfer agent,
execute and deliver to the transferee or holder the transferred or exchange
Definitive Certificate or Definitive Certificates.
No fee or service charge will be imposed by the Certificate Registrar
for any registration of transfer or exchange referred to above. The Certificate
Registrar may require payment by each transferor of a sum sufficient to pay any
tax, expense or other governmental charge payable in connection with any such
transfer.
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YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Regular Certificate will depend on (1) the
price at which such Certificate is purchased by an investor and (2) the rate,
timing and amount of distributions on such Certificate. The rate, timing and
amount of distributions on any Regular Certificate will in turn depend on, among
other things:
(1) the rate and timing of principal payments (including voluntary and
involuntary prepayments) and the extent to which such amounts are
to be applied in reduction of the Certificate Balance (or Notional
Balance) of the Class of Certificates to which such Certificate
belongs;
(2) the rate, timing and severity of Realized Losses on the Mortgage
Loans and the extent to which such losses are allocable in
reduction of the Certificate Balance (or Notional Balance) of any
Class of Certificates;
(3) with respect to any class of Certificates (other than the Class
A-1, Class A-2, class B and Class C Certificates), the Weighted
Average Net Mortgage Rate as in effect from time to time; and
(4) disproportionate principal payments (whether resulting from
differences in amortization schedules, prepayments or otherwise)
on Mortgage Loans having Net Mortgage Rates that are higher or
lower than the current Weighted Average Net Mortgage Rate will
affect the yield on the Class A-EC Certificates.
Rate and Timing of Principal Payments. The yield to holders of
Certificates purchased at a discount or premium will be affected by the rate and
timing of principal payments made in reduction of the Certificate Balance of
such Certificates. The Pooled Principal Distribution Amount for each
Distribution Date generally will be distributable in its entirety to each Class
of Regular Certificates, sequentially in order of Class designation, in each
case until the Certificate Balance of each such Class of Certificates is reduced
to zero. Consequently, the rate and timing of principal payments made in
reduction of the Certificate Balance of the Regular Certificates will be
directly related to the rate and timing of principal payments on or in respect
of the Mortgage Loans.
Defaults on the Mortgage Loans, particularly at or near their stated
maturity dates, may result in significant delays in payments of principal on the
Mortgage Loans and, accordingly, on the Certificates, while work-outs are
negotiated, foreclosures are completed or bankruptcy proceedings are resolved.
The yield to investors in the Subordinate Certificates will be very sensitive to
the timing and magnitude of losses on the Mortgage Loans due to liquidations
following a default, and will also be very sensitive to delinquencies in
payment. In addition, the Special Servicer has the option, subject to certain
limitations, to extend the maturity of Mortgage Loans following a default in the
payment of a Balloon Payment. For more information, you should refer to the
sections in this prospectus supplement titled "The Pooling and Servicing
Agreement--Servicing of the Mortgage Loans; Collection of Payments" and
"--Realization Upon Mortgage Loans" and to the section in the prospectus titled
"Certain Legal Aspects of the Mortgage Loans-Foreclosure."
The rate and timing of principal payments and defaults and the severity
of losses on the Mortgage Loans may be affected by a number of factors,
including, without limitation, the terms of the Mortgage Loans (for example, the
provisions requiring the payment of Prepayment Premiums or Yield Maintenance
Charges and amortization terms that require Balloon Payments or include an
Anticipated Repayment Date), prevailing interest rates, the market value of the
Mortgaged Properties, the demographics and relative economic vitality of the
areas in which the Mortgaged Properties are located, the general supply and
demand for such facilities (and their uses) in such areas, the quality of
management of Mortgaged Properties, the servicing of the Mortgage Loans, federal
and state tax laws (which are subject to change) and other opportunities for
investment.
The rate of prepayment on the Mortgage Pool is likely to be affected by
the amount of any required Yield Maintenance Charges and Prepayment Premiums and
the borrowers' ability to refinance their related Mortgaged Loans. If prevailing
market interest rates for mortgage loans of a comparable type, term and risk
level have decreased enough to offset any required Yield Maintenance Charges and
Prepayment Premium, a borrower may have an increased incentive to refinance its
Mortgage Loan. Under such circumstances a borrower may refinance to "lock in" a
fixed rate or a lower rate or to take advantage of an initial "teaser rate" on
an adjustable rate mortgage loan (that is, a mortgage interest rate below that
which would otherwise apply if the
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applicable index and gross margin were applied). Also, a borrower may refinance
its Mortgage Loan to "cash out" (that is, to take advantage of an increase in
the market value of the Mortgaged Property).
In addition, some borrowers may sell Mortgaged Properties in order to
realize their equity therein, to meet cash flow needs or to make other
investments. Changes in federal, state and local tax laws or deferral programs
may also impact the refinance opportunities. Also, 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. Under the circumstances described
under "Description of the Mortgage Pool-Certain Terms and Conditions of the
Mortgage Loans-Excess Interest," the holders of 100% of the Class N Certificates
or the Special Servicer will have the option to purchase any ARD Loan on or
after its Anticipated Repayment Date at a price equal to its outstanding
Scheduled Principal Balance, plus accrued and unpaid interest, and unreimbursed
Advances made with respect thereto, plus accrued and unpaid interest on such
advances. The exercise of this option may accelerate repayment of certain
Certificates, but is not expected to result in repayment of all Classes on the
same Distribution Date.
If the markets for commercial and multifamily real estate should
experience an overall decline in property values such that the outstanding
balances of the Mortgage Loans exceed the value of the respective Mortgaged
Properties, a borrower under a non-recourse loan may have a decreased incentive
to fund operating cash flow deficits. As a result, actual losses may be higher
than those originally anticipated by investors.
Neither the Depositor, the Transferor, the Mortgage Loan Sellers nor
the Trustee, or any affiliate of any of them, makes any representation as to the
particular factors that will affect the rate and timing of prepayments and
defaults on particular Mortgage Loans or as to the relative importance of such
factors. None of them makes any representation as to the percentage of the
principal balance of the Mortgage Loans that will be prepaid at all or at any
time or as to whether a default will occur as of any date.
The extent to which the yield to maturity of any Class of Regular
Certificates may vary from the anticipated yield will depend upon the degree to
which they are purchased at a discount or premium and when, and to what degree,
payments of principal on the Mortgage Loans are in turn distributed in reduction
of the Certificate Balance of such Certificates. An investor should consider, in
the case of any Regular Certificate 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. An investor should consider, in the case of any Certificate purchased at
a premium (or the Class A-EC Certificates, which have no Certificate Balances),
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. In
general, the earlier a payment of principal on the Mortgage Loans is distributed
in reduction of the Certificate Balance or Notional Balance of any Regular
Certificate purchased at a discount or premium the greater will be the effect on
an investor's yield to maturity. As a result, the effect on an investor's yield
of principal payments on the Mortgage Loans occurring at a rate higher (or
lower) than the rate anticipated by the investor during any particular period
would not be fully offset by a subsequent like reduction (or increase) in the
rate of such principal payments.
A Mortgage Loan as to which an Appraisal Reduction Event occurs may
generate collections at the same rate it had prior to such Appraisal Reduction
Event. Under such circumstances, available Funds will include the principal
portion of any Appraisal Reduction actually collected and the portion of the
interest payments actually collected that is equal to interest accrued on
unreversed Appraisal Reductions allocated to an outstanding Class at the related
Pass-Through Rate (the sum of any such amounts, the "Appraisal Reduction Excess
Collections"). Such amounts will be distributable to the more senior outstanding
Classes of Certificates, which therefore will receive collections in respect of
interest or principal at an increased rate. There can be no assurance that a
subsequent appraisal will reverse an Appraisal Reduction in whole or in part,
that the related borrower will thereafter make payments at any particular rate
or that Realized Losses will be reimbursed to any Class.
Balloon Payments/ARD Loan Payments. ___of the Mortgage Loans
representing approximately ____% of the Initial Pool Balance, are Balloon Loans
that will have substantial payments (that is, Balloon Payments) due at their
stated maturities, unless previously prepaid. ________________ ___ of the
Mortgage Loans, representing approximately ____% of the Initial Pool Balance,
are ARD Loans. The ability of the borrowers to pay the Balloon Payments at the
maturity of the Balloon Loans or to prepay an ARD Loan in full on the related
Anticipated Repayment Dates may depend on their ability to sell or refinance
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the Mortgaged Properties, which, in turn, will depend on a number of factors
described above many of which are beyond the control of such borrowers. The
Certificates are subject to the risk of default by the borrowers in making the
required Balloon Payments or prepayments of ARD Loans on their Anticipated
Repayment Dates. If any borrower is unable to make the applicable Balloon
Payment when due or to prepay an ARD Loan on the Anticipated Repayment Date, the
weighted average lives of the Certificates are likely to be longer than
expected.
Losses and Shortfalls. The yield to holders of the Regular Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Shortfalls in
Available Funds resulting from shortfalls in collections of amounts payable on
the Mortgage Loans (to the extent not advanced) or additional Master Servicer or
Special Servicer compensation, interest on Advances, extraordinary Trust Fund
expenses or other similar items will generally be borne as described above under
"Description of the Certificates."
Pass-Through Rate. The Pass-Through Rates on the Certificates other
than the Class D and E Certificates, are related to the Weighted Average Net
Mortgage Rate. Therefore, a decrease in the Net Mortgage Rate for any Mortgage
Loan (e.g., as a result of a modification) will result in the Certificates
accruing interest at a rate higher than the Net Mortgage Rate for the Mortgage
Pool and there will not be sufficient cash flow to make all interest payments
due on each of such Classes. Any such interest shortfall would affect such
Certificates in reverse sequential order commencing with the Class N
Certificates.
The Weighted Average Net Mortgage Rate will fluctuate over the lives of
the Certificates as a result of scheduled amortization, voluntary prepayments,
Appraisal Reductions and liquidations of Mortgage Loans. If principal payments,
including voluntary and involuntary Principal Prepayments, are made on a
Mortgage Loan with a relatively high Net Mortgage Rate at a rate faster than the
rate of principal payments on the Mortgage Pool as a whole, the Pass-Through
Rates applicable to the Certificates (other than the Class A-1, Class A-2, Class
B and Class C Certificates) will be adversely affected. Accordingly, the yield
on each such Class of Certificates will be sensitive to changes in the
outstanding principal balances of the Mortgage Loans as a result of scheduled
amortization, voluntary prepayments and liquidations of Mortgage Loans.
Delay in Payment of Distributions. Because monthly distributions will
not be made to Certificateholders until, at the earliest, the _____ day of the
month following the month in which interest accrued on the Certificates, the
effective yield to the holders of the Regular Certificates will be lower than
the yield that would otherwise be produced by the applicable Pass-Through Rate
and purchase prices (assuming such prices did not account for such delay).
WEIGHTED AVERAGE LIFE
Weighted average life of a Certificate refers to the average amount of
time that will elapse from the Closing Date to the date of distribution to the
investor of each dollar distributed in reduction of Principal Balance or
Notional Balance of such security. The weighted average life of each class of
Certificates will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid.
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 model represents an assumed constant
rate of prepayment each month, expressed as an annual rate, relative to the then
outstanding principal balance of a pool of mortgage loans for the life of such
mortgage loans. As used in each of the following tables, the column headed "0%"
assumes that none of the Mortgage Loans is prepaid before maturity. The columns
headed "3%", "5%", "7%", "10%" and "15%" assume that no prepayments are made on
any Mortgage Loan during such Mortgage Loan's Lock out Period, if any, or during
such Mortgage Loan's Yield Maintenance Period, if any, or during such Mortgage
Loan's Defeasance Lockout Period, if any, and are otherwise made on each of the
Mortgage Loans at the indicated CPRs. CPR does not purport to be either an
historical description of the prepayment experience of any pool of mortgage
loans or a prediction of the anticipated rate of prepayment of any mortgage
loans, including the Mortgage Loans to be included in the Trust Fund.
The tables set forth below have been prepared on the basis of certain
assumptions as described below regarding the characteristics of the Mortgage
Loans that are expected to be included in the Mortgage Pool as described under
"Description of the Mortgage Pool" herein and the performance thereof. The
tables assume, among other things, that:
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(1) as of the Closing Date the Mortgage Loans (except as set forth
herein) provide for a Monthly Payment of principal and interest
that would fully amortize the remaining principal balance of such
Mortgage Loan using the Monthly Payments set forth in Annex A
hereto, commencing on ________________ (including Balloon Payments
on the maturity dates set forth in Annex A);
(2) neither the Depositor, the Transferor nor the related Mortgage
Loan Seller will repurchase any Mortgage Loan, and none of the
Master Servicer, the Special Servicer, the Depositor or the
holders of the Class R-I Certificates will exercise its option to
purchase Mortgage Loans and thereby cause a termination of the
Trust Fund;
(3) there are no delinquencies or Realized Losses;
(4) no Prepayment Premiums are paid;
(5) there are no Appraisal Reduction Amounts;
(6) payments on the Certificates will be made on the 15th day of each
month, commencing in ________________ (notwithstanding that any
such day is not a Business Day or is fewer than four Business Days
after the related Determination Date);
(7) there are no ongoing Trust Fund expenses payable out of the Trust
Fund other than Servicing Fees;
(8) the Regular Certificates will be purchased on the Closing Date;
(9) no defaults occur with respect to any of the Mortgage Loans;
(10) all of the Mortgage Loans accrue interest based upon a 360 day
year composed of twelve 30 day months;
(11) all Mortgage Loans have a maturity date on the first day of a
month; and
(12) each ARD Loan is paid in full on its Anticipated Repayment Date
notwithstanding the fact that prepayments could occur under such
ARD Loans prior to such Anticipated Repayment Date and that, in
either case, such prepayments would not be accompanied by payment
of a Yield Maintenance Charge or Prepayment Premium.
The actual performance of the Mortgage Loans will differ from the
assumptions used in calculating the tables set forth below, which are
hypothetical in nature and are provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. Any
difference between such assumptions and the actual performance of the Mortgage
Loans, or actual prepayment or loss experience, will affect the percentages of
initial Certificate Balance outstanding over time and the weighted average lives
of the classes of Certificates.
Subject to the foregoing discussion and assumptions, the following
tables indicate the weighted average life of each class of Certificates, and set
forth the percentages of the initial Certificate Balance or Notional Balance of
each class Certificates that would be outstanding after each of the Distribution
Dates shown based on different prepayment speed assumptions. Prepayments on
mortgage loans are commonly measured relative to a prepayment standard or model.
A common model (the "Constant Prepayment Rate" or "CPR") represents an assumed
constant rate of prepayment relative to the then outstanding principal balance
of a pool of new mortgage loans for the life of such mortgage loans. The
weighted average life of each Class is determined by (1) multiplying the amount
of each distribution in reduction of the Certificate Balance or Notional Balance
of such Class by the number of years from the date of purchase to the related
Distribution Date, (2) adding the results and (3) dividing the sum by the
aggregate distributions in reduction of Certificate Balance or Notional Balance
referred to in clause (1).
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<TABLE>
<CAPTION>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
(OR NOTIONAL BALANCE)
OUTSTANDING FOR EACH DESIGNATED SCENARIO
DISTRIBUTION DATE CLASS [ ] CLASS [ ]
PREPAYMENT SPEED(1) PREPAYMENT SPEED(2)
----------------------------------------------------- ---------------------------------------------------
0.00% 3.00% 5.00% 7.00% 10.00% 15.00% 0.00% 3.00% 5.00% 7.00% 10.00% 15.00%
----- ----- ----- ----- ------ ------ ----- ----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
(1) Prepayments on mortgage loans are commonly measured relative to a prepayment
standard or model. A common model (the "Constant Prepayment Rate" or "CPR")
represents an assumed constant rate of prepayment relative to the then
outstanding principal balance of a pool of new mortgage loans for the life of
such mortgage loans.
(2) The weighted average life of each Class is determined by (i) multiplying the
amount of each distribution in reduction of the Certificate Balance or Notional
Balance of such Class by the number of years from the date of purchase to the
related Distribution Date, (ii) adding the results and (iii) dividing the sum by
the aggregate distributions in reduction of Certificate Balance or Notional
Balance referred to in clause (i).
MASTER SERVICER AND SPECIAL SERVICER
[Provide description]
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement, to be dated on or about ____________ (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Master Servicer, the Special
Servicer and the Trustee.
Upon written request, the Depositor will provide to a prospective or
actual holder of a Certificate a copy (without exhibits) of the Pooling and
Servicing Agreement without charge. Requests should be addressed to Prudential
Securities Secured Financing Corporation, One New York Plaza, New York, New York
10292, attention: David Rogers, at telephone number (212) 214-1000.
ASSIGNMENT OF THE MORTGAGE LOANS
On or before the Closing Date, the Depositor will assign or cause the
assignment of the Mortgage Loans, without recourse, to the Trustee for the
benefit of the holders of Certificates. On or before the Closing Date, the
Depositor will deliver to the Trustee the following set of documents for each
Mortgage Loan (the "Trustee Mortgage File") (with a copy to the Master
Servicer):
(1) the original promissory note for such Mortgage Loan, endorsed by
the applicable Mortgage Loan Seller in blank in the following
form: "Pay to the order of , without recourse," which the
Master Servicer or its designee is authorized to complete and
which promissory note and all endorsements thereof shall show
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a complete chain of endorsement from the originator of such
Mortgage Loan to the applicable Mortgage Loan Seller, then to the
Transferor and then to the Depositor;
(2) (a) the original recorded Mortgage for such Mortgage Loan or a
copy thereof certified by the related title insurance company,
public recording office or closing agent in the form in which it
was executed or was submitted for recording, (b) the related
original recorded Assignment of Mortgage to the applicable
Mortgage Loan Seller or a copy thereof certified by the related
title insurance company, public recording office or closing agent
in the form in which it was executed or was submitted for
recording, and (c) the related original Assignment of Mortgage
executed by the applicable Mortgage Loan Seller in blank, which
the Master Servicer or its designee is authorized to complete and
which, except for the insertion of the name of the assignee and
any related recording information which is not yet available to
the applicable Mortgage Loan Seller, is in suitable form for
recordation in the jurisdiction in which the related Mortgaged
Property is located;
(3) if the security agreement for such Mortgage Loan is separate from
the related Mortgage, the original security agreement or a
counterpart thereof, and if the security agreement is not assigned
under the Assignments of Mortgage described in clause (2) above,
the original assignment of such security agreement to the
applicable Mortgage Loan Seller or a counterpart thereof and the
original assignment of such security agreement executed by the
applicable Mortgage Loan Seller in blank which the Master Servicer
or its designee is authorized to complete;
(4) a copy of each Form UCC-1 financing statement, if any, filed with
respect to personal property and fixtures constituting a part of
the Mortgaged Property for such Mortgage Loan, together with a
copy of each Form UCC-2 or UCC-3 assignment, if any, of such
financing statement to the applicable Mortgage Loan Seller and a
copy of each Form UCC-2 or UCC-3 assignment, if any, of such
financing statement executed by the applicable Mortgage Loan
Seller in blank which the Master Servicer or its designee is
authorized to complete and which, except for the insertion of the
name of the assignee and any related filing information which is
not yet available to the applicable Mortgage Loan Seller, is in
suitable form for filing in the filing office in which such
financing statement was filed;
(5) the original Loan Agreement for such Mortgage Loan, if any, or a
counterpart thereof;
(6) the original lender's title insurance policy (or the original pro
forma title insurance policy) for such Mortgage Loan, together
with any endorsements thereto;
(7) if any Assignment of Leases, Rents and Profits for such Mortgage
Loan is separate from the related Mortgage, (a) the original
recorded Assignment of Leases, Rents and Profits or a copy thereof
certified by the related title insurance company, public recording
office or closing agent in the form in which it was executed or
was submitted for recording, (b) the related original recorded
reassignment of such instrument, if any, to the applicable
Mortgage Loan Seller or a copy thereof certified by the related
title insurance company, public recording office or closing agent
in the form in which it was executed or was submitted for
recording, and (c) the related original reassignment of such
instrument, if any, executed by the applicable Mortgage Loan
Seller in blank which the Master Servicer or its designee is
authorized to complete and which, except for the insertion of the
name of the assignee and any related recording information which
is not yet available to the applicable Mortgage Loan Seller, is in
suitable form for recordation in the jurisdiction in which the
related Mortgaged Property is located. Any such reassignments may
also be included in a related Assignment of Mortgage and need not
be a separate instrument;
(8) copies of the ESAs or similar studies or reports on the Mortgaged
Property for such Mortgage Loan prepared in connection with the
origination of such Mortgage Loan;
(9) if any related assignment of contracts is separate from the
related Mortgage, the original assignment of contracts or a
counterpart thereof, and if the assignment of contracts is not
assigned under the Assignments of Mortgage described in clause (2)
above, the related original reassignment of such instrument to the
applicable
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Mortgage Loan Seller or a counterpart thereof and the related
original reassignment of such instrument executed by the
applicable Mortgage Loan Seller in blank which the Master Servicer
or its designee is authorized to complete;
(10) with respect to any Reserve Accounts for such Mortgage Loan, a
copy of any separate agreement relating thereto between the
related borrower and the originator;
(11) the original of any other written agreement, instrument or
document securing such Mortgage Loan, including, without
limitation, original guarantees for such Mortgage Loan or the
original letter of credit, if any, for such Mortgage Loan,
together with any and all amendments thereto, including, without
limitation, any amendment which entitles the Master Servicer to
draw upon such letter of credit on behalf of the Trustee for the
benefit of the Certificateholders, and the original of each
instrument or other item of personal property given as security
for such Mortgage Loan the possession by a secured party of which
is necessary to the secured party's valid, perfected, first
priority security interest therein, together with all assignments
or endorsements thereof necessary to entitle the Master Servicer
to enforce a valid, perfected, first priority security interest
therein on behalf of the Trustee for the benefit of the
Certificateholders;
(12) with respect to any Reserve Accounts for such Mortgage Loan, a
copy of the UCC-1 financing statements, if any, submitted for
filing relating to the applicable Mortgage Loan Seller's security
interest in such Reserve Accounts and all funds contained therein,
together with a copy of each Form UCC-2 or UCC-3 assignment, if
any, of such financing statement to the applicable Mortgage Loan
Seller and a copy of each Form UCC-2 or UCC-3 assignment, if any,
of such financing statement executed by the applicable Mortgage
Loan Seller in blank, which the Master Servicer or its designee is
authorized to complete and which, except for the insertion of the
name of the assignee and any related filing information which is
not yet available to the applicable Mortgage Loan Seller, is in
suitable form for filing in the filing office in which such
financing statement was filed; and
(13) copies of any and all amendments, modifications, supplements and
waivers related to any of the foregoing.
If the Depositor cannot deliver any original or certified recorded
document described above on the Closing Date, the Depositor will use its best
efforts to deliver (or cause to be delivered) such original or certified
recorded documents within 45 days from the Closing Date (subject to delays
attributable to the failure of the appropriate recording office to return such
documents, in which case the Depositor will deliver (or cause to be delivered)
such documents promptly upon receipt thereof). The Trustee is obligated to
review the Trustee Mortgage File for each Mortgage Loan within 90 days after the
later of delivery or the Closing Date and report any missing documents or
certain types of defects therein to the Depositor.
The Master Servicer will hold all remaining Mortgage Loan Documents and
all other documents related to each Mortgage Loan, including copies of any
management agreements, ground leases, appraisals, surveys, environmental reports
and similar documents and any other written agreements relating to each Mortgage
Loan (collectively, the "Master Servicer Mortgage File" and together with the
Trustee Mortgage File, the "Mortgage File") in trust for the benefit of the
Trustee on behalf of Certificateholders. The legal ownership of all records and
documents with respect to each Mortgage Loan prepared by or that come into the
possession of the Master Servicer will immediately vest in the Trustee, in trust
for the benefit of Certificateholders.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Pooling and Servicing Agreement requires the Master Servicer and
the Special Servicer to service and administer the Mortgage Loans (or in the
case of the Special Servicer, the Specially Serviced Mortgage Loans and REO
Mortgage Loans) on behalf of the Trust Fund solely in the best interests of and
for the benefit of all of the Certificateholders and the Trust Fund, in
accordance with the terms of the Pooling and Servicing Agreement and the
Mortgage Loans. To the extent consistent with the foregoing and except to the
extent that the Pooling and Servicing Agreement provides for a contrary specific
course of action, each of the Master Servicer and the Special Servicer is
required to service and administer the Mortgage Loans (1) in the same manner in
which, and with the same care, skill, prudence and diligence with which it
services and administers similar mortgage loans for itself and other third-party
portfolios, giving due consideration to the customary and usual standards of
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practice used by prudent institutional commercial mortgage loan servicers of
loans comparable to the Mortgage Loans, or (2) in the same manner in which, and
with the same care, skill, prudence and diligence with which it services and
administers similar mortgage loans that it owns, whichever standard of care is
higher, and taking into account its other obligations under the Pooling and
Servicing Agreement and with the purpose of maximizing the estimated net present
value of each Mortgage Loan, but without regard to:
(1) any other relationship that the Master Servicer, the Special
Servicer, any sub-servicer, the Depositor, the Trustee, or any
affiliate of any of them may have with the borrowers or any
affiliate of such borrowers;
(2) the ownership of any Certificate by the Master Servicer, the
Special Servicer or any affiliate of either;
(3) the Master Servicer's or the Trustee's obligations, as applicable,
to make Advances or to incur servicing expenses with respect to
the Mortgage Loans;
(4) the Master Servicer's, the Special Servicer's or any
sub-servicer's right to receive compensation for its services
under the Pooling and Servicing Agreement or for any particular
transaction;
(5) the ownership, servicing or management for others by the Master
Servicer, the Special Servicer or any sub-servicer of any other
mortgage loans or property; or
(6) any obligation of the Master Servicer to pay any indemnity with
respect to any repurchase obligation.
Each of the Master Servicer and the Special Servicer is permitted, at
its own expense, to employ sub-servicers, agents or attorneys in performing any
of its obligations under the Pooling and Servicing Agreement. In each such
instance, neither the Master Servicer nor the Special Servicer will be relieved
of any of its obligations under the Pooling and Servicing Agreement and each
will be responsible for the acts and omissions of any such sub-servicers, agents
or attorneys. The Pooling and Servicing Agreement provides, however, that
neither the Master Servicer nor the Special Servicer, nor any of their
directors, officers, employees or agents, will have any liability to the Trust
Fund or the Certificateholders for taking any action or refraining from taking
any action in good faith or for errors in judgment. The foregoing provision
would not protect the Master Servicer, the Special Servicer or such other person
from:
(1) any liability resulting from a breach of any of the Master
Servicer's or the Special Servicer's respective representations or
warranties in the Pooling and Servicing Agreement;
(2) any specific liability imposed on the Master Servicer or the
Special Servicer for a breach of the servicing standards set forth
in the Pooling and Servicing Agreement; or
(3) any liability by reason of the Master Servicer's or the Special
Servicer's willful misfeasance, bad faith, fraud or negligence in
the performance of its duties under the Pooling and Servicing
Agreement or its reckless disregard of its obligations and duties
under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement requires the Master Servicer and
the Special Servicer to make reasonable efforts to collect all payments called
for under the terms of the Mortgage Loans and to follow collection procedures as
are consistent with the servicing standards under the Pooling and Servicing
Agreement. Consistent with the above, the Master Servicer or the Special
Servicer, as applicable, may, in its discretion, waive any late payment charge
or penalty fee in connection with any delinquent Monthly Payment or Balloon
Payment with respect to any Mortgage Loan. With respect to any ARD Loan, the
Pooling and Servicing Agreement prohibits the Master Servicer and the Special
Servicer from taking any enforcement action (other than requests for
collections) for payment of Excess Interest or principal in excess of the
principal component of the constant Monthly Payment for such ARD Loan before (1)
any acceleration of the maturity of such ARD Loan based on a default other than
the non-payment of Excess Interest or principal in excess of the principal
component of the related Scheduled Monthly Payment for such ARD Loan or (2) the
final maturity date of such ARD Loan.
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ADVANCES
Subject to the limitations described below, the Master Servicer will be
obligated to advance (each such amount, a "P&I Advance"), on the Business Day
preceding each Distribution Date (the "Remittance Date"), an amount equal to the
total or any portion of the Monthly Payment on any Mortgage Loan that was
delinquent as of the close of business on the Business Day preceding such
Remittance Date or, in the event of a default in the payment of a Balloon
Payment, the Assumed Scheduled Payment for the related Balloon Loan, unless the
Master Servicer determines that any such advance would be a Nonrecoverable
Advance and delivers to the Trustee an officer's certificate and accompanying
documentation related to a determination of nonrecoverability.
For any Distribution Date, the amount required to be advanced for 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 Master Servicer without
giving effect to the Appraisal Reduction minus any Appraisal Reduction Amount
for such Mortgage Loan for such Distribution Date.
In addition to P&I Advances, the Master Servicer will also be obligated
(subject to the limitations described herein) to make cash advances ("Property
Advances," and together with P&I Advances, "Advances") (a) to pay certain costs
and expenses incurred in connection with defaulted Mortgage Loans, acquisition
of title to, or management of, REO Properties, or the sale of defaulted Mortgage
Loans or REO Properties, (b) to pay delinquent real estate taxes, assessments
and hazard insurance premiums and (c) to cover other similar costs and expenses
necessary to protect and preserve the security of the related Mortgage. None of
the Master Servicer, the Special Servicer or the Trustee, as applicable, shall
be obligated to advance from its own funds any amounts required to cure any
failure of any Mortgaged Property to comply with any applicable environmental
law or to contain, clean up or remedy any environmental condition present at any
Mortgaged Property, and such expense shall be an expense of the Trust Fund.
If the Trustee becomes the successor Master Servicer, the Trustee, as
successor Master Servicer acting in accordance with the servicing standards set
forth in the Pooling and Servicing Agreement, will be required to make the
Advances subject to its determination of recoverability. The Trustee will be
entitled to rely conclusively on any non-recoverability determination of the
Master Servicer. For more detailed information, you should refer to the section
below in this prospectus supplement titled "--The Trustee."
The obligation of the Master Servicer or the Trustee, as applicable, to
make Advances with respect to any Mortgage Loan continues through the
foreclosure of such Mortgage Loan and until the liquidation of the Mortgage Loan
or related Mortgaged Properties. Advances are intended to provide a limited
amount of liquidity and not to guarantee or insure against losses. Neither the
Master Servicer nor the Trustee will be required to make any Advance that it
determines (possibly based on, among other things, an updated Appraisal), in its
good faith business judgment, will not be recoverable out of related late
payments, Insurance Proceeds, Liquidation Proceeds and certain other collections
with respect to the Mortgage Loan as to which such Advance was made. To the
extent that any borrower is not obligated under its Mortgage Loan Documents to
pay or reimburse any portion of any related outstanding Advances as a result of
a modification of such Mortgage Loan by the Special Servicer that forgives loan
payments or other amounts that the Master Servicer or the Trustee previously
advanced, and the Master Servicer or the Trustee determines that no other source
of payment or reimbursement for such Advances is available to it, such Advances
will be deemed to be nonrecoverable. In addition, if the Master Servicer or the
Trustee, as applicable, determines that any Advance previously made will not be
recoverable from the foregoing sources, then the Master Servicer or the Trustee,
as applicable, will be reimbursed for such Advance, plus interest thereon, out
of amounts on deposit in the Collection Account before any distributions are
made on the Certificates. Any such determination must be evidenced by an
officer's certificate delivered to the Trustee (or, in the case of the Trustee,
to the Depositor) setting forth such determination of nonrecoverability and the
procedure and considerations of the Master Servicer or the Trustee, as
applicable, forming the basis of such determination. Such officer's certificate
must include a copy of the Updated Appraisal or any other information or reports
obtained by the Master Servicer or the Trustee, as applicable, such as property
operating statements, rent rolls, property inspection reports, engineering
reports and other documentation which may support the determination as set forth
in such certificate.
The Master Servicer or the Trustee, as applicable, will be reimbursed
for any Advance it has made from (1) any collections on or in respect of the
particular Mortgage Loan or REO Property with respect to which such Advance was
made or
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(2) upon determining that such Advance is not recoverable in the manner
described in the preceding paragraph, from any other amounts from time to time
on deposit in the Collection Account.
Except as set forth above with respect to Advances made during payment
grace periods, the Master Servicer or the Trustee, as applicable, will be
entitled to receive interest at a rate equal to the prime rate published in The
Wall Street Journal, or if The Wall Street Journal is no longer published, The
New York Times (the "Advance Rate"), on its outstanding Advances. The Master
Servicer or the Trustee, as applicable, will be authorized to pay itself such
interest from general collections on all of the Mortgage Loans before any
payments are made to holders of Certificates. If the interest on such Advance is
not offset by the Default Interest, a shortfall will result which generally will
result in a Class Interest Shortfall for the most Subordinate Class then
outstanding.
APPRAISAL REDUCTIONS
After an Appraisal Reduction Event has occurred for a Mortgage Loan, an
Appraisal Reduction will be calculated for such Mortgage Loan. An "Appraisal
Reduction Event" for a Mortgage Loan will occur at the earliest of:
(1) the third anniversary of the date on which the first extension of
the maturity date of such Mortgage Loan became effective as a
result of a modification of such Mortgage Loan by the Special
Servicer, which extension did not decrease the aggregate amount of
Monthly Payments on the Mortgage Loan;
(2) 120 days after an uncured delinquency occurs for such Mortgage
Loan;
(3) the date on which a reduction in the amount of Monthly Payments on
such Mortgage Loan, or a change in any other material economic
term of such Mortgage Loan (other than an extension of its
maturity) becomes effective as a result of a modification of such
Mortgage Loan by the Special Servicer;
(4) 60 days after a receiver has been appointed;
(5) 60 days after the related borrower of such Mortgage Loan declares
bankruptcy or is the subject of an involuntary bankruptcy
proceeding; or
(6) immediately after such Mortgage Loan becomes an REO Mortgage Loan;
provided, however, that an Appraisal Reduction Event will 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 (1) the outstanding Scheduled Principal
Balance of such Mortgage Loan over (2) the excess of (a) 90% of the appraised
value of the related Mortgaged Property as determined (A) by one or more
appraisals, if such Mortgage Loan has an outstanding Scheduled Principal Balance
equal to or in excess of $2,000,000, conducted in compliance with the Code of
Professional Ethics and Standards of Professional Conduct of the Appraisal
Institute and the Uniform Standards of Professional Appraisal Practice as
adopted by the Appraisal Standards Board of the Appraisal Foundation and
accepted and incorporated into FIRREA (the costs of which will be paid by the
Master Servicer as a Property Advance) or (B) by either an appraisal conducted
as described in the preceding clause (A) or an internal valuation performed by
the Special Servicer, if such Mortgage Loan has an outstanding Scheduled
Principal Balance less than $2,000,000 over (b) the sum of (A) to the extent not
previously advanced by the Master 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) 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 Master Servicer or
the Trustee. If an appraisal is to be obtained as described above, the Special
Servicer must obtain such appraisal within 60 days of the occurrence of the
related Appraisal Reduction Event (and not more than 120 days thereafter,
including within such 120-day period the passage of any time period set forth in
the definition of Appraisal Reduction Event). If such appraisal is not obtained
by such date or if, for any Mortgage Loan with an outstanding Scheduled
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 outstanding
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Scheduled 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 appraisal, the Special Servicer will be required to
calculate and report to the Master Servicer, and the Master Servicer will report
to the Trustee, the Appraisal Reduction to take into account such appraisal.
As a result of calculating an Appraisal Reduction for a Mortgage Loan,
the P&I Advance for such Mortgage Loan for the related Remittance Date will be
reduced, which will have the effect of reducing the amount of interest available
for distribution to the Certificateholders. 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 (1) one-twelfth of the Pass-Through
Rate for each Class of Certificates to which an Appraisal Reduction is allocated
and (2) the Appraisal Reduction for such Mortgage Loan. Appraisal Reductions
will be allocated to the Subordinate Certificates in reverse sequential order of
the Classes for purposes of determining Voting Rights. For more detailed
information, you should refer to the sections in this prospectus supplement
titled "--Realization Upon Mortgage Loans" and "--Voting Rights."
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, unless the outstanding Scheduled Principal Balance of such Mortgage Loan
is $1,000,000 or less, 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 will
be paid by the Master Servicer as a Property 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 will redetermine and report to the
Master Servicer and the Trustee the amount of the Appraisal Reduction for such
Mortgage Loan, and such redetermined Appraisal Reduction will replace the prior
Appraisal Reduction for such Mortgage Loan. Notwithstanding the foregoing, the
Special Servicer will not be required to obtain an appraisal or perform an
internal valuation for a Mortgage Loan which is the subject of an Appraisal
Reduction Event if the Special Servicer has obtained an appraisal for the
related Mortgaged Property during the 12-month period before the occurrence of
such Appraisal Reduction Event. Instead, the Special Servicer may use such prior
appraisal in calculating any Appraisal Reduction for such Mortgage Loan.
ACCOUNTS
Collection Account. The Master Servicer will establish and maintain a
segregated account or accounts (the "Collection Account") into which it will be
required to deposit, within two Business Days of receipt, the following payments
and collections received or made by it on or with respect to the Mortgage Loans:
(1) all payments on account of principal on the Mortgage Loans,
including the principal component of Unscheduled Payments on the
Mortgage Loans;
(2) all payments on account of interest and Default Interest on the
Mortgage Loans and the interest portion of all Unscheduled
Payments and all Prepayment Premiums;
(3) any amounts required to be deposited by the Master Servicer in
connection with losses realized on Permitted Investments with
respect to funds held in the Collection Account and in connection
with Prepayment Interest Shortfalls;
(4) (a) all Net REO Proceeds transferred from an REO Account, (b) all
amounts transferred from lockbox accounts in respect of ARD Loans
and payable to the Certificateholders and (c) all Condemnation
Proceeds, Insurance Proceeds and Net Liquidation Proceeds not
required to be applied to the restoration or repair of the related
Mortgaged Property;
(5) any amounts received from borrowers that represent recoveries of
Property Advances or Appraisal Reduction Excess Collections; and
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(6) any other amounts required by the provisions of the Pooling and
Servicing Agreement to be deposited into the Collection Account by
the Master Servicer or the Special Servicer, including, without
limitation, proceeds of any purchase or repurchase of a Mortgage
Loan as described under the sections in this prospectus supplement
titled "Description of the Mortgage Pool--Representations and
Warranties; Repurchase," "The Pooling and Servicing
Agreement-Realization Upon Mortgage Loans" and "Description of the
Certificates--Early Termination."
The foregoing requirements for deposits in the Collection Account will
be exclusive, and any payments in the nature of late payment charges, late fees,
"insufficient funds" check charges, assumption fees, loan modification fees,
loan service transaction fees, extension fees, demand fees, beneficiary
statement charges and similar fees need not be deposited in the Collection
Account by the Master Servicer. To the extent permitted by applicable law, the
Master Servicer or the Special Servicer, as applicable, will be entitled to
retain any such charges and fees received with respect to the Mortgage Loans. In
the event that the Master Servicer deposits into the Collection Account any
amount not required to be deposited therein, the Master Servicer may at any time
withdraw such amount from the Collection Account.
Distribution Account. The Trustee will establish and maintain a
segregated account or accounts (the "Distribution Account") in its name in trust
for the benefit of the holders of Certificates. For each Distribution Date, the
Master Servicer will deposit in the Distribution Account, to the extent of funds
on deposit in the Collection Account on or before the Remittance Date, the
aggregate amount of Pooled Available Funds as required by the Pooling and
Servicing Agreement, plus (1) any Prepayment Premiums, Yield Maintenance
Charges, Excess Interest and Appraisal Reduction Excess Collections received by
the Master Servicer during the related Collection Period, (2) any Default
Interest received with respect to any Mortgage Loan that is in default with
respect to its Balloon Payment, and (3) amounts payable to the Trustee as
compensation for its services (including, but not limited to, the Trustee Fee).
To the extent not included in Available Funds, the Master Servicer will remit to
the Trustee all P&I Advances for deposit into the Distribution Account on the
related Remittance Date. For more detailed information, you should refer to the
section in this propectus supplement titled "Description of the
Certificates--Distributions."
The Collection Account and the Distribution Account will be held in the
name of the Trustee (or, in the case of the Collection Account, the Master
Servicer on behalf of the Trustee) on behalf of the holders of Certificates, and
the Trustee (and, in the case of the Collection Account, the Master Servicer)
will be authorized to make withdrawals therefrom. Each of the Collection Account
and the Distribution Account will be either (1) a segregated account or accounts
maintained with either a federally or state-chartered depository institution or
trust company the short term unsecured debt obligations of which are rated [at
least P-1 by Moody's and at least "A-1+" by Fitch] or, if deposits are to be
held therein for 30 or more days, the long term unsecured debt obligations of
which (or of such institution's parent holding company) are rated [at least A22
by Moody's and at least BBB by Fitch] or (2) a segregated trust account or
accounts maintained with a federally or state chartered depository institution
or trust company acting in its fiduciary capacity, having, in either case, a
combined capital and surplus of at least $50,000,000 and subject to supervision
or examination by federal or state authority and subject to regulations
regarding fiduciary funds on deposit substantially similar to 12 CFR 9.10(b), or
as to which the Trustee has been informed in writing by each Rating Agency that
the maintenance of such account will not, in and of itself, result in a
downgrading, withdrawal or qualification of the rating then assigned by such
Rating Agency to any Class of Certificates (an "Eligible Bank"). Amounts on
deposit in the Collection Account and certain other accounts may be invested in
certain United States government securities and other investments specified in
the Pooling and Servicing Agreement ("Permitted Investments"). For a listing of
Permitted Investments, you should refer to the section in the prospectus titled
"Description of the Certificates--Accounts."
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Master Servicer may make withdrawals from the Collection Account
for the following purposes:
(1) to remit on or before each Remittance Date to the Distribution
Account an amount equal to Available Funds and any Prepayment
Premiums, Yield Maintenance Charges, Excess Interest and Appraisal
Reduction Excess Collections for the related Distribution Date;
(2) to pay or reimburse the Master Servicer or the Trustee, as
applicable, for Advances made by it and interest on such Advances,
but the Master Servicer's right to reimburse itself will be
limited as described above in the section in this prospectus
supplement titled "--Advances";
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(3) to (a) pay on or before each Remittance Date to the Master
Servicer and the Special Servicer the fee portion of the servicing
compensation for the related Distribution Date (provided that the
Servicing Fees must be paid from interest received on the related
Mortgage Loan), (b) pay from time to time to the Master Servicer
any interest or investment income earned on funds deposited in the
Collection Account, (c) pay to the Master Servicer as additional
servicing compensation any Prepayment Interest Surplus received in
the preceding Collection Period, and (d) pay to the Master
Servicer or the Special Servicer, as applicable, any other amounts
constituting additional servicing compensation;
(4) to pay on or before each Distribution Date to the Depositor, the
Transferor, the related Mortgage Loan Seller or other purchaser of
each Mortgage Loan or REO Property that has previously been
purchased or repurchased by such person pursuant to the Pooling
and Servicing Agreement, all amounts received thereon during the
related Collection Period and after the date as of which the price
of such purchase or repurchase was determined;
(5) to the extent not reimbursed or paid pursuant to any of the above
clauses, to reimburse or pay to the Master Servicer, the Special
Servicer, the Trustee and/or the Depositor, as applicable, for
certain other unreimbursed expenses incurred by or on behalf of
such person pursuant to and to the extent reimbursable under the
Pooling and Servicing Agreement and to satisfy any other payment
or reimbursement obligations of the Trust Fund under the Pooling
and Servicing Agreement;
(6) to pay to the Trustee amounts payable as compensation, including,
but not limited to, the Trustee Fee, and amounts requested by the
Trustee to pay taxes on certain net income with respect to REO
Properties (provided that the Trustee will also have the right to
withdraw such amounts for such applications);
(7) to withdraw any amount deposited into the Collection Account that
was not required to be deposited therein; and
(8) to clear and terminate the Collection Account pursuant to a plan
for termination and liquidation of the Trust Fund.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The Master Servicer or the Special Servicer, as applicable, will be
obligated to enforce the Trustee's rights under the "due-on-sale" clause in the
related Mortgage Loan Documents to accelerate the maturity of the related
Mortgage Loan, unless (1) such provision is not enforceable under applicable
law, (2) such enforcement is reasonably likely to result in meritorious legal
action by the related borrower, or (3) the Master Servicer or the Special
Servicer, as applicable, acting in accordance with the servicing standards
described herein, determines that such enforcement is not in the best interests
of the Trust Fund. However, if the Scheduled Principal Balance of any Mortgage
Loan or a group of Mortgage Loans (1) made to a single borrower or affiliated
borrowers or (2) that is secured by any group of cross-collateralized Mortgaged
Properties equals or exceeds 5% of the Pool Balance, the Master Servicer or the
Special Servicer, as applicable, will not be permitted to refrain from enforcing
the Trustee's rights under the "due-on-sale" clause in such Mortgage Loan or a
group of Mortgage Loans without obtaining a confirmation from each Rating Agency
that such forbearance will not result in the reduction, modification or
withdrawal of its then current rating of any Class of Certificates.
If (1) applicable law prohibits the enforcement of a "due-on-sale"
clause, (2) the Master Servicer or the Special Servicer is otherwise prohibited
from taking such action, or (3) the Master Servicer or the Special Servicer has
determined that such enforcement is not in the best interests of the Trust Fund
as described in the preceding paragraph (the confirmation of rating described
therein has been obtained), then the Mortgage Loan in question may be assumed by
a third person. As a result, (1) the original borrower may be released from
liability for the unpaid principal balance of such Mortgage Loan and interest
thereon at the applicable Mortgage Rate during the remaining term of such
Mortgage Loan, (2) the Master Servicer may accept payments in respect of such
Mortgage Loan from the new owner of the related Mortgaged Property, and (3) the
Master Servicer or the Special Servicer, as applicable, may enter into an
assumption agreement with a new purchaser whereby the new owner of the related
Mortgaged Property will be substituted as the borrower and the original borrower
will be released, so long as (to the extent permitted by law) the new owner
satisfies the underwriting requirements customarily imposed by the Master
Servicer or
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the Special Servicer, as applicable, as a condition to its approval
of a borrower on a new mortgage loan substantially similar to such Mortgage
Loan. In the event a Mortgage Loan is assumed as described in the preceding
sentence, the Trustee, the Master Servicer and the Special Servicer will not
permit any modification of such Mortgage Loan other than as described below in
the section in this prospectus supplement titled "--Amendments, Modifications
and Waivers." The Master Servicer or the Special Servicer, as applicable, will
be entitled to retain as additional servicing compensation any assumption fees
paid by the original borrower or the new owner in connection with such
assumption. For more information, you should refer to the section in the
prospectus titled "Certain Legal Aspects of the Mortgage Loans-Enforceability of
Certain Provisions-Due-on-Sale Provisions." A new owner of the related Mortgaged
Property may be substituted, or a junior or senior lien may be allowed on the
related Mortgaged Property, without the consent of the Master Servicer, the
Special Servicer or the Trustee in a bankruptcy proceeding involving the
Mortgaged Property.
If any Mortgage Loan contains a provision in the nature of a
"due-on-encumbrance" clause, which by its terms (1) provides that such Mortgage
Loan will (or may at the related mortgagee's option) become due and payable upon
the creation of any lien or other encumbrance on such Mortgaged Property or (2)
requires the consent of the related mortgagee to the creation of any such lien
or other encumbrance on such Mortgaged Property, then, for so long as the
related Mortgage Loan is included in the Trust Fund, and such borrower creates
any such lien or other encumbrance, the Master Servicer or the Special Servicer,
as applicable, on behalf of the Trust Fund, will enforce such provision. As a
result, the Master Servicer or the Special Servicer, as applicable, will (1)
accelerate the payments due on such Mortgage Loan or (2) withhold its consent to
the creation of any such lien or other encumbrance, as applicable. However, the
Master Servicer or the Special Servicer, as applicable, will not enforce such
provision if, acting in accordance with the applicable servicing standards, it
determines that such enforcement would not be in the best interests of the Trust
Fund and it is able to obtain the confirmation of each Rating Agency that such
Rating Agency will not downgrade, withdraw or qualify its then current rating of
any Class of Certificates as a result of such forbearance from enforcement.
A "due-on-sale" or "due-on-encumbrance" clause may, under certain
circumstances, be unenforceable against a borrower that is a debtor in a case
under the Bankruptcy Code. In addition, notwithstanding the foregoing, the
Master Servicer or the Special Servicer, as applicable, may elect to refrain
from enforcing any "due-on-encumbrance" provision relating to any junior or
senior lien on a Mortgaged Property imposed in any bankruptcy proceeding
involving such Mortgaged Property.
INSPECTIONS; APPRAISALS
The Master Servicer (or the Special Servicer with respect to Specially
Serviced Mortgage Loans or REO Properties) is required, at its own expense, to
inspect each Mortgaged Property at such times and in such manner as are
consistent with the servicing standards described herein, but will in any event:
(1) inspect each Mortgaged Property at least once every 12 months (or 24 months
for any Mortgage Loan with a principal balance of less then $2,000,000), with
the first such inspection to be completed on or before ____________, unless each
of the Rating Agencies has confirmed in writing that a longer period between
inspections (which may not exceed 24 months) will not result, in and of itself,
in a downgrading, withdrawal or qualification of the rating then assigned by
such Rating Agency to any Class of Certificates; and (2) inspect the related
Mortgaged Property as soon as practicable after the Master Servicer or the
Special Servicer, as applicable, has received any Financial and Lease Reporting
Fees for any Mortgage Loan (unless such property has been inspected by the
Master Servicer or the Special Servicer during the preceding 120-day period). In
addition, if any Monthly Payment on any Mortgage Loan becomes more than 60 days
delinquent (without giving effect to any grace period permitted under the
related promissory note or Mortgage), the Special Servicer will inspect each
related Mortgaged Property at its own expense as soon as practicable thereafter.
REALIZATION UPON MORTGAGE LOANS
If a Mortgage Loan has defaulted or, in the Special Servicer's
judgment, a payment default is imminent, the Special Servicer 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.
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GENERAL STANDARDS FOR CONDUCT IN FORECLOSING OR SELLING DEFAULTED LOANS
Any costs and expenses incurred in any foreclosure or similar
proceedings will be advanced by the Master Servicer as a Property Advance,
unless the Master Servicer determines that such Advance would constitute a
Nonrecoverable Advance.
If the Special Servicer elects to proceed with a non-judicial
foreclosure in accordance with the laws of the jurisdiction in which the subject
Mortgaged Property is located, the Special Servicer will not be required to
pursue a deficiency judgment against the related borrower or any other liable
party if (1) the laws of the jurisdiction do not permit such a deficiency
judgment after a non-judicial foreclosure or (2) the Special Servicer
determines, in its best judgment, that the likely recovery resulting from a
deficiency judgment will not be sufficient to warrant the cost, time, expense
and/or exposure of pursuing the deficiency judgment and such determination is
evidenced by an officer's certificate delivered to the Trustee.
The Special Servicer, on behalf of the Trust Fund, is prohibited from
obtaining title to a Mortgaged Property as a result of or in lieu of foreclosure
or otherwise obtaining title to any direct or indirect partnership interest or
other equity interest in any borrower pledged pursuant to a pledge agreement and
thereby become the beneficial owner of a Mortgaged Property, and otherwise
acquiring possession of, or taking any other action with respect to, any
Mortgaged Property if, as a result of any such action, the Trustee, for the
Trust Fund or the Certificateholders, would be considered to hold title to, to
be a "mortgagee-in-possession" of, or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of CERCLA or any comparable law, unless
the Special Servicer has previously determined, in accordance with the servicing
standards set forth in the Pooling and Servicing Agreement and based on an
updated ESA prepared within the past twelve months by a person independent of
the Special Servicer who regularly conducts environmental assessments, that:
(1) such Mortgaged Property is in compliance with applicable
environmental laws in all material respects or, if such Mortgaged
Property is found not to be in compliance after consultation with
an environmental consultant, that it would be in the best economic
interest of the Trust Fund to take such actions as are necessary
to bring such Mortgaged Property in compliance with such laws, and
(2) there are no circumstances present at such Mortgaged Property
relating to the use, management or disposal of any hazardous
materials for which investigation, testing, monitoring,
containment, clean-up or remediation could reasonably be required
under any currently effective federal, state or local law or
regulation, or that, if any such hazardous materials are present
for which such action could reasonably be required, after
consultation with an environmental consultant, it would be in the
best economic interest of the Trust Fund to take such actions with
respect to such Mortgaged Property.
In the event that the environmental assessment last obtained by the
Special Servicer with respect to a Mortgaged Property indicates that such
Mortgaged Property may not be in compliance with applicable environmental laws
in all material respects or that hazardous materials may be present but does not
definitively establish such fact, the Special Servicer will cause such further
environmental tests as the Special Servicer deems prudent to protect the
interests of Certificateholders to be conducted by a person independent of the
Special Servicer who regularly conducts such tests. Any such tests will be
deemed part of the ESA obtained by the Special Servicer for these purposes.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed-in-lieu of foreclosure, the deed or certificate of sale
will be issued to the Trustee or to its nominee (which may not be the Master
Servicer or the Special Servicer) or a separate trustee or co-trustee on behalf
of the Trust Fund. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, such Mortgage Loan will be considered
to be a Mortgage Loan held in the Trust Fund until such time as the related REO
Property is sold by the Trust Fund and will be reduced by Net REO Proceeds
allocated to the principal.
If the Trust Fund acquires a Mortgaged Property by foreclosure or
deed-in-lieu of foreclosure upon a default of a Mortgage Loan, the Pooling and
Servicing Agreement provides that the Special Servicer must administer such
Mortgaged Property in such manner so that it qualifies at all times as
"foreclosure property" within the meaning of Tax Code Section 860G(a)(8). The
Pooling and Servicing Agreement also requires that, within 90 days of the Trust
Fund's acquisition of
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such Mortgaged Property, the Special Servicer contract with an Independent
Contractor (as defined in the Pooling and Servicing Agreement) for the
management and operation of such Mortgaged Property, unless the Special Servicer
provides the Trustee with an opinion of counsel that the operation and
management of the Mortgaged Property other than through an independent
contractor will not cause such Mortgaged Property to fail to qualify as
"foreclosure property." Such opinion will be obtained at an expense of the Trust
Fund.
The Special Servicer may offer to sell to any person any Specially
Serviced Mortgage Loan or any REO Property, if and when the Special Servicer
determines, consistent with the servicing standards set forth in the Pooling and
Servicing Agreement, that such a sale would be in the best economic interests of
the Trust Fund. In any event, the Special Servicer will offer to sell each REO
Property so that the sale of such REO Property will occur within the period
specified in the Pooling and Servicing Agreement. For any such sale of a
Specially Serviced Mortgaged Loan or a REO Property, the Special Servicer will
give the Trustee at least 10 Business Days' prior written notice of its
intention to sell. The Special Servicer will accept an offer from any person
that is determined by the Special Servicer to be a fair price for such Specially
Serviced Mortgage Loan or REO Property, if the highest offeror is not an
Interested Person, or is determined to be such a price by the Trustee (which may
be based upon updated independent appraisals received by the Trustee or the
Special Servicer, as applicable), if the highest offeror is an Interested
Person; provided, however, that any offer by an Interested Person in the amount
of the Repurchase Price shall be deemed to be a fair price. "Interested Person"
means the Depositor, the Master Servicer, the Special Servicer, the Trustee, any
borrower or property manager of a Mortgaged Property, an independent contractor
engaged by the Special Servicer to manage or operate an REO Property or any
known affiliate of any of the foregoing. Notwithstanding anything to the
contrary herein, neither the Trustee, in its individual capacity, nor any of its
affiliates may offer to purchase any Specially Serviced Mortgage Loan or any REO
Property. In addition, the Special Servicer may accept an offer that is not the
highest offer if it determines, in accordance with the servicing standards set
forth in the Pooling and Servicing Agreement, that acceptance of such offer
would be in the best interests of the holders of Certificates (for example, if
the prospective buyer making the lower offer is more likely to perform its
obligations, or other terms offered by the prospective buyer making the lower
offer are more favorable).
The Special Servicer will prepare a report (an "Asset Status Report")
for each Mortgage Loan which becomes a Specially Serviced Mortgage Loan within
30 days after the servicing of such Mortgage Loan is transferred to the Special
Servicer. The Special Servicer will deliver each Asset Status Report to the
Master Servicer and the Rating Agencies. The Special Servicer will be required
to implement the courses of action detailed in such report in a commercially
reasonable manner. However, the Special Servicer will not be required to take or
refrain from taking any action that would cause it to violate applicable law,
the Pooling and Servicing Agreement (including the servicing standards set forth
therein) or the REMIC Provisions.
After a default in the payment of a Balloon Payment, the Special
Servicer may, acting in accordance with the servicing standards set forth in the
Pooling and Servicing Agreement, grant any number of successive extensions of up
to 12 months (or the period from the beginning of the first of such extension,
if shorter) on the defaulted Mortgage Loan. However, the Special Servicer may
not grant any extension that (1) permits the related borrower to make payments
of only interest for a period of longer than 12 months in the aggregate, or (2)
extends the maturity date of the related Mortgage Loan beyond the Scheduled
Final Distribution Date for the Class N Certificates or the date that is 10
years before the expiration of any related ground lease with respect to the
Mortgaged Property securing such Mortgage Loan without the written consent of
each Rating Agency.
AMENDMENTS, MODIFICATIONS AND WAIVERS
Neither the Master Servicer nor the Special Servicer may amend, modify,
waive or otherwise consent to the change of the stated maturity date of any
Mortgage Loan, the payment of principal of or interest (including Default
Interest) on any Mortgage Loan, or any other term of any Mortgage Loan, unless
(1) such amendment, modification, waiver or consent is not a "significant
modification" under Section 1001 of the Tax Code, (2) to the extent such
amendment, modification, waiver or consent would constitute a "significant
modification" under Section 1001 of the Tax Code, such modification is
occasioned by a default or a reasonably foreseeable default on such Mortgage
Loan, or (3) the Master Servicer or the Special Servicer shall have received an
Opinion of Counsel (at the Trust Fund's expense) that such amendment,
modification or waiver would not cause an imposition of a tax under the REMIC
Provisions or cause a loss of the REMIC status.
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THE TRUSTEE
___________________________. will act as the Trustee pursuant to the
Pooling and Servicing Agreement. The Trustee's corporate trust office is located
at _____________________.
The Trustee may resign at any time by giving written notice to the
Depositor, the Master Servicer, the Special Servicer and the Rating Agencies.
Upon such notice of the Trustee's resignation, the Master Servicer will appoint
a successor trustee. If no successor trustee is appointed within 30 days after
the giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for appointment of a successor trustee.
The Depositor or the Master Servicer may remove the Trustee if, among
other things, (1) the Trustee ceases to be eligible to continue as such under
the Pooling and Servicing Agreement, (2) the Trustee at any time becomes
incapable of acting, (3) the Trustee is adjudged bankrupt or insolvent, (4) a
receiver of the Trustee or its property is appointed, or (5) any public officer
takes charge or control of the Trustee or its property. The holders of
Certificates representing a majority of the aggregate Voting Rights may remove
the Trustee upon written notice to the Master Servicer, the Special Servicer,
the Depositor and the Trustee. No resignation or removal of the Trustee or
appointment of a successor trustee will become effective until the acceptance of
the appointment by the successor trustee.
The Trust Fund will indemnify the Trustee and its directors, officers,
employees, agents and affiliates against any and all losses, liabilities,
damages, claims or expenses (including reasonable attorneys' fees) arising in
respect of the Pooling and Servicing Agreement or the Certificates (but only to
the extent that they are expressly reimbursable under the Pooling and Servicing
Agreement or are "unanticipated expenses incurred by the REMIC" under Treasury
Regulations Section 1.860G-1(b)(s)(ii)) other than those resulting from the
negligence, fraud, bad faith or willful misconduct of the Trustee and those for
which such indemnified persons are indemnified by the Master Servicer or the
Special Servicer as described in the last sentence of this paragraph. The
Trustee will not be required to expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties under the Pooling
and Servicing Agreement or in the exercise of any of its rights or powers if, in
the Trustee's opinion, the repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it. Each of the Master
Servicer and the Special Servicer will indemnify the Trustee and its directors,
officers, employees, agents and affiliates against any losses, liabilities,
damages, claims and expenses resulting from the willful misconduct, fraud, bad
faith and/or negligence in the performance of the Master Servicer's or the
Special Servicer's respective duties under the Pooling and Servicing Agreement
or by reason of reckless disregard of the Master Servicer's or the Special
Servicer's respective obligations and duties under the Pooling and Servicing
Agreement.
DUTIES OF THE TRUSTEE
The Trustee, the Master Servicer and the Special Servicer will make no
representation as to the validity or sufficiency of the Pooling and Servicing
Agreement, the Certificates or this Prospectus Supplement or the validity,
enforceability or sufficiency of the Mortgage Loans or related documents. The
Trustee will not be accountable for the use or application by the Depositor of
any Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor, the Master Servicer or the
Special Servicer in respect of the Mortgage Loans, or any funds deposited in or
withdrawn from the Collection Account or the Distribution Account by the
Depositor, the Master Servicer or the Special Servicer, other than with respect
to any funds held by the Trustee.
If no Event of Default has occurred of which the Trustee has actual
knowledge or, 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 and other instruments required to be furnished to it, the Trustee is
required to examine such documents and to determine only whether they conform on
their face to the requirements of the Pooling and Servicing Agreement.
If the Master Servicer fails to make any required Advance, the Trustee,
as successor Master Servicer, will be required to make such Advance to the
extent that such Advance is not deemed to be nonrecoverable. The Trustee will be
entitled to rely conclusively on any determination by the Master Servicer that
an Advance, if made, would be nonrecoverable (any such Advance, a
"Nonrecoverable Advance"). The Trustee will be entitled to reimbursement for
each Advance made by it in the
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same manner and to the same extent as the Master Servicer. For more detailed
information, you should refer to the section in this prospectus supplement
titled "--Advances."
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer will be entitled to receive a monthly servicing fee
(the "Servicing Fee") with respect to each Mortgage Loan and for each
Distribution Date equal to one-twelfth (1/12) of a per annum rate (the related
"Servicing Fee Rate") ranging from [0.05%] to [0.25%] (in the case of the
Mortgage Loans sold to the Transferor by [relevant Mortgage Seller]) and equal
to [0.05%] (in the case of the Mortgage Loans sold to the Transferor by
[relevant Mortgage Seller]) multiplied by the Scheduled Principal Balance of
such Mortgage Loan as of the Due Date in the month preceding the month in which
such Distribution Date occurs. The Servicing Fee relating to each Mortgage Loan
will be retained by the Master Servicer from payments and collections (including
Insurance Proceeds and Liquidation Proceeds) on such Mortgage Loan. The Master
Servicer will also be entitled to retain as additional servicing compensation:
(1) investment income earned on amounts on deposit in the Collection
Account and the Reserve Accounts (to the extent consistent with
applicable law and the related Mortgage Loan Documents);
(2) amounts collected on the Mortgage Loans that are not Specially
Serviced Mortgage Loans in the nature of late payment charges,
late fees, "insufficient funds" check charges (including with
respect to Specially Serviced Mortgage Loans), loan service
transaction fees, extension fees, demand fees, modification fees,
assumption fees, beneficiary statement charges and similar fees
and charges (but excluding any Prepayment Premiums, Yield
Maintenance Charges, Excess Interest, Appraisal Reduction Excess
Collections, Default Interest or other amounts required to be
deposited or retained in the Collection Account);
(3) Financial and Lease Reporting Fees relating to any Mortgage Loan
that is not a Specially Serviced Mortgage Loan and to the extent
permitted under the related Mortgage Loan; and
(4) Prepayment Interest Surplus (to the extent not offset against any
Prepayment Interest Shortfall in accordance with the Pooling and
Servicing Agreement).
The Master Servicer will reimburse the Trustee for certain out of
pocket expenses incurred by the Trustee in the performance of its duties in
accordance with the Pooling and Servicing Agreement.
The Master Servicer will pay all expenses incurred in connection with
its responsibilities under the Pooling and Servicing Agreement (subject to
reimbursement as described herein).
SPECIAL SERVICING
With respect to any Mortgage Loan that is designated a Specially
Serviced Mortgage Loan, the Master Servicer will transfer its servicing
responsibilities to the Special Servicer, but will continue to (1) receive
payments on such Mortgage Loan (including amounts collected by the Special
Servicer), (2) make certain calculations relating to such Mortgage Loan, and (3)
make remittances and prepare certain reports to the Trustee relating to such
Mortgage Loan. If the related Mortgaged Property is acquired in respect of any
such Mortgage Loan whether through foreclosure, deed-in-lieu of foreclosure or
otherwise (upon acquisition, an "REO Property"), the Special Servicer will
continue to be responsible for the operation and management thereof. The Master
Servicer will have no responsibility for the performance by the Special Servicer
of its duties under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement will define a "Specially Serviced
Mortgage Loan" to include any Mortgage Loan with respect to which:
(1) the related borrower is 60 or more days delinquent in the payment
of principal and interest (regardless of whether P&I Advances have
been reimbursed in respect thereof);
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(2) the related borrower has expressed to the Master Servicer its
inability to pay the Mortgage Loan or a hardship in paying the
Mortgage Loan in accordance with its terms;
(3) the Master Servicer has received notice that the related borrower
has (a) become the subject of any bankruptcy, insolvency or
similar proceeding, (b) admitted in writing its inability to pay
its debts as they come due, or (c) made an assignment for the
benefit of creditors;
(4) the Master Servicer has received notice of a foreclosure or
threatened foreclosure of any lien on the Mortgaged Property
securing such Mortgage Loan;
(5) a default of which the Master Servicer has notice (other than a
failure by the related borrower to pay principal or interest) and
which materially and adversely affects the interests of the
Certificateholders has occurred and remains unremedied for the
applicable grace period specified in the Mortgage Loan (or, if no
grace period is specified, 60 days); provided, that in any case a
default requiring a Property Advance will be deemed to materially
and adversely affect the interests of the Certificateholders;
(6) the related borrower has failed to make a Balloon Payment when due
(unless the Master Servicer and the Special Servicer agree in
writing that such Mortgage Loan is likely to be paid in full
within 30 days after such default);
(7) the Master Servicer proposes to commence foreclosure or other
workout arrangements; or
(8) the Master Servicer otherwise determines that there is a material
risk of default by the related borrower.
A Mortgage Loan will cease to be a Specially Serviced Mortgage Loan:
(1) with respect to the circumstances described in clauses (1) and (6)
above, when the related borrower has brought the Mortgage Loan
current and thereafter has made three consecutive full and timely
Monthly Payments thereon; provided that with respect to the
circumstances described in clause (6), the related borrower may
satisfy the requirements above pursuant to any workout recommended
by the Special Servicer;
(2) with respect to the circumstances described in clauses (2) and (4)
above, when such circumstances cease to exist in the good faith
judgment of the Special Servicer and with respect to the
circumstances described in clauses (3) and (7), when such
circumstances cease to exist;
(3) with respect to the circumstances described in clause (5) above,
when such default is cured; or
(4) with respect to the circumstances described in clause (8) above,
when the Master Servicer determines that there is no longer a
material risk of default by the related borrower,
provided that, in any such case, no circumstance exists (as described above) at
such time that would cause such Mortgage Loan to be otherwise characterized as a
Specially Serviced Mortgage Loan.
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 (through workout by the Special
Servicer or otherwise) 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 the full servicing
responsibilities of such Mortgage Loan (a "Corrected Mortgage Loan") to the
Master Servicer.
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_______________ will be the initial Special Servicer. The Special
Servicer may be removed and a successor Special Servicer may be appointed (1)
first, by the holders of the majority of the aggregate Voting Rights of the
Class M Certificates at such time as Realized Losses allocated to the Class N
Certificates equal or exceed 75% of the initial Certificate Balance of such
Class, but only until such time as Realized Losses allocated to the Class M
Certificates equal or exceed 50% of the initial Certificate Balance of such
Class; (2) second, by the holders of the majority of the aggregate Voting Rights
of the Class L Certificates, but only until such time as Realized Losses
allocated to the Class L Certificates equal or exceed 50% of the initial
Certificate Balance of such Class; and (3) thereafter, by the holders of the
majority of the aggregate Voting Rights of the second most subordinate Class of
Certificates then outstanding, but only until such time as Realized Losses
allocated to such Class equal or exceed 50% of the initial Certificate Balance
of such Class. If any such removal is made without cause, then the costs of
transferring the servicing responsibilities to a successor Special Servicer will
be paid by the removing Certificateholders as described in the Pooling and
Servicing Agreement.
Notwithstanding the foregoing, the removal of the Special Servicer and
the appointment of a successor Special Servicer will not be effective until (1)
the successor Special Servicer has assumed in writing all of the
responsibilities, duties and liabilities of the Special Servicer under the
Pooling and Servicing Agreement pursuant to an agreement satisfactory to the
Trustee, and (2) each of the Rating Agencies confirms to the Trustee in writing
that such appointment and assumption will not result, in and of itself, in a
downgrading, withdrawal or qualification of the rating then assigned by such
Rating Agency to any Class of Certificates.
The Special Servicer will be entitled to certain fees, including a
special servicing fee (the "Special Servicing Fee") equal to one-twelfth of
[__%] of the outstanding Scheduled Principal Balance of each Specially Serviced
Mortgage Loan on a monthly basis. In addition to the Special Servicing Fee, the
Special Servicer will also receive, with respect to any Specially Serviced
Mortgage Loan or REO Property that is sold or transferred or otherwise
liquidated (except in connection with the repurchase of a Mortgage Loan as
described under "Description of the Mortgage Pool--Representations and
Warranties; Repurchase"), a disposition fee (the "Disposition Fee") equal to the
product of (1) the excess, if any, of (a) the proceeds of the sale or
liquidation of such Specially Serviced Mortgage Loan or REO Property over (b)
any broker's commission and related brokerage referral fees and (2) (a) [___%],
if such sale or liquidation occurs within 12 months after the date on which the
Mortgage Loan initially became a Specially Serviced Mortgage Loan or (b) [___%],
if such sale or liquidation occurs upon or after the expiration of such 12-month
period. Furthermore, the Special Servicer will receive, as additional servicing
compensation, a workout fee (the "Workout Fee") equal to the product of [___%]
and the amount of Net Collections received by the Master Servicer or the Special
Servicer with respect to each Corrected Mortgage Loan. If any Corrected Mortgage
Loan again becomes a Specially Serviced Mortgage Loan, any right to the Workout
Fee relating to such Mortgage Loan earned from the initial modification,
restructuring or workout thereof will terminate, and the Special Servicer will
be entitled to a new Workout Fee for such Specially Serviced Mortgage Loan upon
resolution or workout of the subsequent event of default under such Specially
Serviced Mortgage Loan. Each of the foregoing fees, along with certain expenses
related to special servicing of a Mortgage Loan, will be payable out of funds
otherwise available to pay principal and interest on the Certificates. The
Special Servicer will also be entitled to retain as additional servicing
compensation (1) all investment income earned on amounts on deposit in any REO
Account and (2) to the extent permitted under the related Mortgage Loan, all
amounts collected with respect to the Specially Serviced Mortgage Loans in the
nature of late payment charges, late fees, assumption fees, loan modification
fees, extension fees, Financial and Lease Reporting Fees (to the extent such
fees are not required to be remitted to the related borrower pursuant to the
related promissory note), loan service transaction fees, beneficiary statement
charges or similar items (but excluding any Default Interest, Yield Maintenance
Charges or other Prepayment Premiums, Excess Interest or Appraisal Reduction
Excess Collections), in each case to the extent received with respect to any
Specially Serviced Mortgage Loan and not required to be deposited or retained in
the Collection Account pursuant to the Pooling and Servicing Agreement.
"Net Collections" means, with respect to any Corrected Mortgage Loan,
an amount equal to all payments on account of principal and interest on such
Mortgage Loan and all Prepayment Premiums, Yield Maintenance Charges and Excess
Interest.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Monthly Reports. On each Distribution Date, the Trustee will mail to
each Certificateholder, with copies to the Depositor, the Paying Agent, the
Underwriter, the Master Servicer and each Rating Agency, a statement on the
distribution to be made on such date, setting forth for each Class:
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(1) the Pooled Principal Distribution Amount and the amount allocable
to principal included in Available Funds;
(2) The Class Interest Distribution Amount distributable to such Class
and the amount of Available Funds allocable thereto, together with
any Class Interest Shortfall allocable to such Class;
(3) The amount of any P&I Advances by the Master Servicer or the
Trustee included in the amounts distributed to the
Certificateholders;
(4) The Certificate Balance of each Class of Certificates after giving
effect to the distribution of amounts in respect of the Pooled
Principal Distribution Amount on such Distribution Date;
(5) Realized Losses and their allocation to the Certificate Balance of
any Class of Certificates;
(6) The Scheduled Principal Balance of the Mortgage Loans as of the
Due Date preceding such Distribution Date;
(7) The number and aggregate principal balance of the Mortgage Loans
(a) delinquent one month, (b) delinquent two months, (c)
delinquent three or more months, (d) as to which foreclosure
proceedings have been commenced, and (e) that otherwise constitute
Specially Serviced Mortgage Loans, and, with respect to each
Specially Serviced Mortgage Loan, the amount of Property Advances
made during the related Collection Period, the amount of P&I
Advances made on such Distribution Date, the aggregate amount of
Property Advances made that remain unreimbursed and the aggregate
amount of P&I Advances made that remain unreimbursed;
(8) With respect to any Mortgage Loan that became an REO Mortgage Loan
during the preceding calendar month, the principal balance of such
Mortgage Loan as of the date it became an REO Mortgage Loan;
(9) As of the Due Date preceding such Distribution Date, as to any REO
Property sold during the related Collection Period, the date on
which the Special Servicer made a Final Recovery Determination and
the amount of the proceeds of such sale deposited into the
Collection Account, and the aggregate amount of REO Proceeds and
Net REO Proceeds (in each case other than Liquidation Proceeds)
and other revenues collected by the Special Servicer with respect
to each REO Property during the related Collection Period and
credited to the Collection Account, in each case identifying such
REO Property by name;
(10) The outstanding principal balance of each REO Mortgage Loan as of
the close of business on the immediately preceding Due Date and
the appraised value of the related REO Property per the most
recent appraisal obtained;
(11) The amount of the servicing compensation paid to the Master
Servicer with respect to such Distribution Date, and the amount of
the additional servicing compensation that was paid to the Master
Servicer with respect to such Distribution Date;
(12) The amount of any Special Servicing Fee, Disposition Fee or
Workout Fee paid to the Special Servicer with respect to such
Distribution Date;
(13) The amount of any Appraisal Reduction allocated, and the amount of
any Appraisal Reduction Excess Collections received, during the
related Collection Period on a loan-by-loan basis and the total
Appraisal Reduction Amount as of such Distribution Date; and
(14) (a) The amount of Yield Maintenance Charges or Prepayment Premiums
collected and any Excess Interest received during the related
Collection Period, and (b) the amount of Default Interest received
during the related Collection Period.
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In the case of information furnished pursuant to clauses (1), (2), (3)
and (14)(a) above, the amounts will be expressed as a dollar amount in the
aggregate for all Certificates of each applicable Class, and will be expressed
as a dollar amount for each Class of Certificates for a certificate having a
denomination of $1,000 initial Certificate Balance or Notional Balance.
Within a reasonable period of time after the end of each calendar year,
the Trustee will furnish to each person who at any time during such calendar
year was a holder of a Certificate (except for a Residual Certificate) a
statement containing the information set forth in clauses (1) and (2) above,
aggregated for such calendar year or applicable portion thereof during which
such person was a Certificateholder. Such obligation of the Trustee will be
deemed to have been satisfied to the extent that it provided substantially
comparable information pursuant to any requirements of the Tax Code as from time
to time in effect.
On each Distribution Date, the Trustee will mail to each holder of a
Residual Certificate a copy of the reports mailed to the other
Certificateholders on such Distribution Date and a statement setting forth the
amounts, if any, actually distributed on the Residual Certificates on such
Distribution Date.
Within a reasonable period of time after the end of each calendar year,
the Trustee will furnish to each person who at any time during such calendar
year was a holder of a Residual Certificate a statement setting forth the
amounts actually distributed on such Certificate aggregated for such calendar
year or applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee will be deemed to have been
satisfied to the extent that it provided substantially comparable information
pursuant to any requirements of the Tax Code as from time to time in effect.
In addition, the Trustee will provide each Certificateholder with any
additional information, if any, regarding the Mortgage Loans that the Master
Servicer or the Special Servicer, in its sole discretion, delivers to the
Trustee for distribution to the Certificateholders. Also, certain information
made available in the Distribution Date Statements may be obtained by accessing
a World Wide Website maintained by the Trustee at _______________________.
Other Available Information. The Master Servicer or the Special
Servicer, if applicable, will promptly give notice to the Trustee, who will
provide a copy to each Certificateholder, each Rating Agency, the Depositor, the
Underwriter, the related Mortgage Loan Seller and the Master Servicer or the
Special Servicer (if affecting a Special Serviced Mortgage Loan), of (1) any
notice from a borrower or insurance company regarding an upcoming voluntary or
involuntary prepayment (including that resulting from a Casualty or
Condemnation) of all or part of the related Mortgage Loan (provided that a
request by a borrower or other party for a quotation of the amount necessary to
satisfy all obligations with respect to a Mortgage Loan will not, in and of
itself, be deemed to be such notice); and (2) any other occurrence known to it
with respect to a Mortgage Loan or REO Property that the Master Servicer or the
Special Servicer determines in accordance with the servicing standards set forth
in the Pooling and Servicing Agreement would have a material effect on such
Mortgage Loan or REO Property. The notice referred to in (2) will include an
explanation as to the reason for such material effect (provided that any
extension of the term of any Mortgage Loan will in any event be deemed to have a
material effect).
In addition to the other reports and information made available and
distributed to the Depositor, the Underwriter, the Trustee or the
Certificateholders pursuant to the provisions of the Pooling and Servicing
Agreement, the Master Servicer and the Special Servicer will, in accordance with
such reasonable rules and procedures as they may adopt, also make available any
information relating to the Mortgage Loans, the Mortgaged Properties or the
borrowers for review by the Depositor, the Underwriter, the Trustee, the
Certificateholders and any other persons to whom the Master Servicer or the
Special Servicer, as the case may be, believes such disclosure is appropriate,
unless prohibited by applicable law or by any documents related to a Mortgage
Loan. In providing such additional information, the Master Servicer or the
Special Servicer may, to the extent it deems such action to be necessary or
appropriate, require the recipient of such information to execute an agreement
governing the availability, use and disclosure of such information. Such
agreement may also contain indemnification provisions for the Master Servicer or
the Special Servicer, as applicable, against any liability or damage that may
arise from disclosing such information.
Upon reasonable prior written request, the Trustee will also make
available during normal business hours, for review by the Depositor, the Rating
Agencies, any Certificateholder, the Underwriter, any person identified to the
Trustee by a Certificateholder as a prospective transferee of a Certificate and
any other persons to whom the Trustee believes such disclosure is appropriate,
the following items:
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(1) the Pooling and Servicing Agreement;
(2) all monthly statements to Certificateholders delivered since the
closing date;
(3) all annual statements as to compliance delivered to the Trustee
and the Depositor; and
(4) all annual independent accountants' reports delivered to the
Trustee and the Depositor.
The Master Servicer or the Special Servicer, as appropriate, will make
available at its offices during normal business hours, for review by the
Depositor, the Underwriter, the Trustee, the Rating Agencies, any
Certificateholder, any person identified to the Master Servicer or the Special
Servicer, as applicable, by a Certificateholder as a prospective transferee of a
Certificate, and any other persons to whom the Master Servicer or the Special
Servicer, as applicable, believes such disclosure is appropriate, the following
items:
(1) the inspection reports prepared by or on behalf of the Master
Servicer or the Special Servicer, as applicable, in connection
with the property inspections conducted by the Master Servicer or
the Special Servicer, as applicable;
(2) any and all modifications, waivers and amendments of the terms of
a Mortgage Loan entered into by the Master Servicer or the Special
Servicer; and
(3) any and all officer's certificates and other evidence delivered to
the Trustee and the Depositor to support the Master Servicer's
determination that any Advance was, or if made, would be, a
Nonrecoverable Advance, in each case except to the extent doing so
is prohibited by applicable law or by any document relating to a
Mortgage Loan.
Each of the Master Servicer, the Special Servicer and the Trustee will
be permitted to require payment of a sum sufficient to cover the reasonable
costs and expenses incurred by it in providing copies of or access to any of the
above information. However, any such costs and expenses arising from any such
request by a Rating Agency will be paid by the Master Servicer.
The Master Servicer will, on behalf of the Trust Fund, prepare, sign
and file with the SEC any and all reports, statements and information relating
to the Trust Fund that the Master Servicer or the Trustee determines are
required to be filed with the SEC pursuant to Sections 13(a) or 15(d) of the
1934 Act. Each such report, statement and information must be filed on or before
the required filing date for such report, statement or information.
Notwithstanding the foregoing, the Depositor will file with the SEC, within 15
days of the closing date, a Form 8-K together with the Pooling and Servicing
Agreement.
None of the Trustee, the Master Servicer and the Special Servicer will
be responsible for the accuracy or completeness of any information supplied to
it by a borrower or other third party for inclusion in any notice or in any
other report or information furnished or provided by the Trustee, Master
Servicer or the Special Servicer under the Pooling and Servicing Agreement. The
Trustee, the Master Servicer and the Special Servicer will be indemnified and
held harmless by the Trust Fund against any loss, liability or expense incurred
in connection with any legal action relating to any statement or omission or
alleged statement or omission in or from such notice, report or information,
including any report filed with the SEC.
VOTING RIGHTS
The "Voting Rights" assigned to each Class will be:
(1) 0% in the case of the Residual Certificates;
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(2) in the case of any other Class of P&I Certificates, a percentage
equal to the product of (a) 96% so long as the Class A-EC Notional
Balance is greater than zero and 97% thereafter and (b) a
fraction, the numerator of which is equal to the aggregate
outstanding Certificate Balance of such Class and the denominator
of which is equal to the aggregate outstanding Certificate
Balances of all Classes of Certificates;
(3) in the case of the Class A-EC Certificates, 1% so long as the
Class A-EC Notional Balance is greater than zero, and 0%
thereafter; and
(4) 3% in the case of the Class N Certificates.
The Voting Rights of any Class of Certificates will be allocated among
holders of Certificates of such Class in proportion to their respective
Percentage Interests; provided, however, that any Certificate held or
beneficially owned by the Depositor, the Master Servicer, the Special Servicer,
the Trustee, a property manager or a borrower or any affiliate thereof will be
deemed not to be outstanding and the Voting Rights to which it is entitled will
not be taken into account in determining whether the requisite percentage of
Voting Rights necessary to effect any consent, approval or waiver that
specifically relates to any such person has been obtained (unless such consent,
approval or waiver is to an action that would materially and adversely affect
the interests of the holders of any Class of Certificates while any such person
is the holder of Certificates aggregating not less than 66 2/3% of the
Percentage Interest of any such Class).
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, two separate "real estate mortgage
investment conduit" ("REMIC") elections will be made with respect to the Trust
Fund, creating two REMICs. Upon the issuance of the Offered Certificates,
O'Melveny & Myers LLP will deliver its opinion, generally to the effect that,
assuming compliance with all provisions of the Pooling and Servicing Agreement,
(1) each pool of assets with respect to which a REMIC election is made will
qualify as a REMIC under the Internal Revenue Code of 1986 (the "Tax Code"), and
(2) (a) the Class A-1, Class A-2, Class A-EC, Class B, Class C, Class D and
Class E Certificates will be, or will represent ownership of, REMIC "regular
interests" and (b) each residual interest will be the sole "residual interest"
in the related REMIC.
Because they represent regular interests, the Regular Certificates
generally will be treated as newly originated debt instruments for federal
income tax purposes. Holders of such Classes of Certificates will be required to
include in income all interest on such Certificates in accordance with the
accrual method of accounting, regardless of a Certificateholder's usual method
of accounting. The Offered Certificates are not expected to be treated for
Federal income tax reporting purposes as having been issued with original issue
discount. For purposes of determining the rate of accrual of market discount,
original issue discount and premium for federal income tax purposes, it has been
assumed that the Mortgage Loans will prepay at the rate of 0% CPR, with all ARD
Loans prepaying on their related Anticipated Repayment Dates. No representation
is made as to whether the Mortgage Loans will prepay at that rate or any other
rate.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a Class of Certificates will be treated as holding a Certificate with bond
premium will depend on such Certificateholder's purchase price. Holders of such
Classes of Certificates should consult their own tax advisors regarding the
possibility of making an election to amortize any such premium. See "Material
Federal Income Tax Consequences" in the Prospectus.
Offered Certificates held by a mutual savings bank or domestic building
and loan association will represent interests in "qualifying real property
loans" within the meaning of Section 593(d) of the Tax Code. Offered
Certificates held by a real estate investment trust will constitute "real estate
assets" within the meaning of Section 856(c)(5)(B) of the Tax Code, and income
with respect to Offered Certificates will be considered "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 Tax Code. Offered Certificates held
by a domestic building and loan association will generally constitute a "regular
or residual interest in a REMIC" with the meaning of Section 7701(a)(19)(C)(xi)
of the Tax Code only in the proportion that the Mortgage Loans are secured by
multifamily apartment buildings. See "Material Federal Income Tax
Consequences--Taxation of the REMIC and its Holders" in the Prospectus.
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For further information regarding the federal income tax consequences
of investing in the Offered Certificates, you should refer to the section in the
prospectus titled "Material Federal Income Tax Consequences--Taxation of the
REMIC."
DUE TO THE COMPLEXITY OF THESE RULES AND THE CURRENT UNCERTAINTY AS TO
THE MANNER OF THEIR APPLICATION TO THE TRUST FUND AND CERTIFICATEHOLDERS, IT IS
PARTICULARLY IMPORTANT THAT POTENTIAL INVESTORS CONSULT THEIR OWN TAX ADVISORS
REGARDING THE TAX TREATMENT OF THEIR ACQUISITION, OWNERSHIP AND DISPOSITION OF
THE CERTIFICATES.
ERISA CONSIDERATIONS
SUMMARY
The Subordinate Certificates may not be purchased by or transferred to:
(1) an employee benefit plan or other retirement arrangement,
including an individual retirement account or a Keogh plan, which
is subject to the fiduciary responsibility provisions of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 4975 of the Tax Code, or a governmental plan
subject to any federal, state or local law ("Similar Law") that
is, to a material extent, similar to the foregoing provisions of
ERISA or the Tax Code ("Plans");
(2) a collective investment fund in which such Plans are invested;
(3) other persons acting on behalf of any such Plan or using the
assets of any such Plan or any entity whose underlying assets
include plan assets by reason of a Plan's investment in the entity
(within the meaning of Department of Labor Regulations Section
2510.3-101); or
(4) an insurance company that is using assets of any insurance company
separate account or general account in which the assets of such
Plans are invested (or which are deemed pursuant to ERISA or any
Similar Law to include assets of such Plans) other than an
insurance company using the assets of its general account under
circumstances whereby the assets of the Trust Fund will not be
treated as "plan assets" for purposes of applying the fiduciary
responsibility and the prohibited transactions provisions of
ERISA, the Tax Code or any Similar Law.
Each prospective transferee of a Certificate will be required to deliver to the
Depositor, the Certificate Registrar and the Trustee either: (a) a transferee
representation letter, substantially in the form of Exhibit D-2 to the Pooling
and Servicing Agreement, stating that such prospective transferee is not a
person referred to in clause (1), (2), (3) or (4) above, or (b) an opinion of
counsel which establishes to the satisfaction of the Depositor, the Trustee and
the Certificate Registrar that the purchase and holding of such Certificate will
not result in the assets of the Trust Fund being deemed to be "plan assets" and
subject to the fiduciary responsibility or prohibited transaction provision of
ERISA, the Tax Code or any Similar Law, and will not constitute or result in a
non-exempt prohibited transaction within the meaning of Section 406 or 407 of
ERISA, Section 4975 of the Tax Code or any Similar Law, and will not subject the
Master Servicer, the Special Servicer, the Depositor, the Trustee or the
Certificate Registrar to any obligation of liability (including obligations or
liabilities under ERISA or Section 4975 of the Tax Code). If a prospective
transferee elects to deliver the opinion of counsel referred to in (b), then
such opinion of counsel will be at the expense of such prospective transferee
and not the expense of the Trustee, the Trust Fund, the Master Servicer, the
Special Servicer, the Certificate Registrar or the Depositor.
TO THE EXTENT ANY OFFERED CERTIFICATE IS IN BOOK-ENTRY FORM, THE HOLDER
OF BENEFICIAL INTEREST IN SUCH CERTIFICATE AND ANY TRANSFEREE THEREOF WILL BE
DEEMED TO HAVE REPRESENTED THAT IT IS NOT A PERSON REFERRED TO IN CLAUSES (1),
(2), (3) OR (4) ABOVE.
None of the Residual Certificates may be purchased by or transferred to
a Plan. Accordingly, the following discussion does not purport to discuss the
considerations under ERISA or Tax Code Section 4975 with respect to the
purchase, holding or disposition of the Residual Certificates.
CERTAIN REQUIREMENTS UNDER ERISA
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General. ERISA and the Tax Code impose certain duties and restrictions
on Plans and certain persons who perform services for Plans. In accordance with
ERISA's general fiduciary standards, before investing in a Certificate a Plan
fiduciary should determine whether to do so is permitted under the governing
Plan instruments and is appropriate for the Plan in view of its overall
investment policy and the composition and diversification of its portfolio. A
Plan fiduciary should especially consider the ERISA requirement of investment
prudence and the sensitivity of the return on the Certificates to the rate of
principal repayments (including voluntary prepayments by the borrowers and
involuntary liquidations) on the Mortgage Loans, as discussed in "Yield and
Maturity Considerations" herein.
Parties in Interest/Disqualified Persons. Other provisions of ERISA
(and corresponding provisions of the Tax Code) prohibit certain transactions
involving the assets of a Plan and persons who have certain specified
relationships to the Plan (so-called "parties in interest" within the meaning of
ERISA or "disqualified persons" within the meaning of the Tax Code). The
Depositor, the Underwriter, the Master Servicer, the Special Servicer or the
Trustee or certain affiliates thereof might be considered or might become
"parties in interest" or "disqualified persons" with respect to a Plan. If so,
the acquisition or holding of Certificates by or on behalf of such Plan could be
considered to give rise to a "prohibited transaction" within the meaning of
ERISA and the Tax Code unless an administrative exemption described below or
some other exemption is available. Special caution should be exercised before
the assets of a Plan are used to purchase a Certificate if, with respect to such
assets, the Depositor, the Underwriter, the Master Servicer, the Special
Servicer or the Trustee or an affiliate thereof either: (1) has discretionary
authority or control with respect to the investment or management of such assets
of such Plan, or (2) has authority or responsibility to give, or regularly
gives, investment advice with respect to such assets 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 needs of the Plan.
Delegation of Fiduciary Duty. Further, if the assets included in the
Trust Fund were deemed to constitute Plan assets, it is possible that a Plan's
investment in the Certificates might 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 might be deemed to constitute prohibited transactions under ERISA and
the Tax Code. Neither ERISA nor the Tax Code define the term "plan assets."
The United States Department of Labor has issued regulations (the "Plan
Asset Regulations") concerning whether a Plan's assets will be considered to
include an interest in the underlying assets of an entity (such as the Trust
Fund) for purposes of the general fiduciary responsibility provisions of ERISA,
as well as for the prohibited transaction provisions of ERISA and the Tax Code,
if the Plan acquires an "equity interest" (such as a Certificate) in an entity.
Certain exceptions are provided in the Plan Asset Regulations whereby
an investing Plan's assets would be considered merely to include its interest in
the Certificates instead of being deemed to include an interest in the
underlying assets of a Trust Fund. However, the Depositor cannot predict in
advance, nor can there be any continuing assurance whether such exceptions may
be applicable, because of the factual nature of certain of the rules set forth
in the Plan Asset Regulations. For example, one of the exceptions in the Plan
Asset 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 Plans,
individual retirement accounts and employee benefit plans not subject to ERISA
(for example, governmental plans), but this exception is tested immediately
after each acquisition of an equity interest in the entity whether upon initial
issuance or in the secondary market.
ADMINISTRATIVE EXEMPTIONS
Individual Administrative Exemptions. The Department has granted to
Prudential Securities Incorporated an individual administrative exemption
(Prohibited Transaction Exemption 90-32, 55 Fed. Reg. 23147 (June 6, 1990, as
amended by Prohibited Transaction Exemption 97-34, 62 Fed. Reg. 39021 (July 21,
1997)) referred to herein as the "Exemption," for certain mortgage-backed and
asset-backed certificates underwritten in whole or in part by Prudential
Securities Incorporated. The Exemption may 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.
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Among the conditions that must be satisfied for the Exemption to apply
are the following:
(1) The acquisition of 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 Certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by
other certificates of the trust fund;
(3) The 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 either Moody's Investors Service,
Inc., Fitch IBCA, Inc., Standard & Poor's Rating Services, a
division of the McGraw-Hill Companies ("S&P"), or Duff & Phelps
Credit Rating Service ("Duff & Phelps");
(4) The Trustee must not be an affiliate of any of the Depositor, the
Underwriter, the Master Servicer, the Special Servicer, any
obligor with respect to the Mortgage Loans included in the Trust
Fund constituting more than 5% of the aggregate unamortized
balance of the assets in the Trust Fund, or any affiliate of such
parties (the "Restricted Group");
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of 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 represents not more than the fair market value of such
mortgage loans; the sum of all payments made to and retained by
the Master 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 SEC under the
1933 Act.
In addition, the Trust must also meet the following requirements:
(1) The corpus of the trust fund must consist solely of assets of the
type that have been included in other investment pools;
(2) Certificates in such other investment pools must have been rated
in one of the three highest rating categories by Moody's Investors
Service, Inc., Fitch IBCA, Inc., S&P or Duff & Phelps for at least
one year before the Plan's acquisition of the certificates
pursuant to the Exemption; and
(3) Certificates evidencing interests in such other investment pools
must have been purchased by investors other than Plans for at
least one year before any Plan's acquisition of the Certificates
pursuant to the Exemption.
If the conditions of the Exemption are met, the acquisition, holding
and resale of Certificates by Plans would be exempt from the prohibited
transaction provisions of ERISA and the Tax Code (regardless of whether a Plan's
assets would be considered to include an ownership interest in the Mortgage
Loans in the Mortgage Pool).
Moreover, the Exemption provides 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:
(1) in the case of an acquisition in connection with the initial
issuance of certificates, at least 50% of each class of
certificates in which Plans have invested is acquired by persons
independent of the Restricted Group; and at least 50% of the
aggregate interest in the trust is acquired by persons independent
of the Restricted Group;
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(2) such fiduciary (or its affiliate) is an obligor with respect to 5%
or less of the fair market value of the obligations contained in
the trust;
(3) the Plan's investment in certificates of any class does not exceed
25% of all of the certificates of that class outstanding at the
time of the acquisitions; and
(4) immediately after the acquisition no more than 25% 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
Certificates by Plans sponsored by the Depositor, the Underwriter, the Trustee,
the Master Servicer, the Special Servicer, any obligor with respect to Mortgage
Loans included in the Trust Fund constituting more than 5% of the aggregate
unamortized principal balance of the assets in the Trust Fund or any affiliate
of such parties (the "Restricted Group").
THE CHARACTERISTICS OF THE SUBORDINATE CERTIFICATES AND THE RESIDUAL
CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTION. ACCORDINGLY, THE
SUBORDINATE CERTIFICATES AND RESIDUAL CERTIFICATES MAY NOT BE PURCHASED BY OR
TRANSFERRED TO A PLAN OR PERSON ACTING ON BEHALF OF ANY PLAN OR USING THE ASSETS
OF ANY SUCH PLAN, OTHER THAN AN INSURANCE COMPANY USING ASSETS OF ITS GENERAL
ACCOUNT UNDER CIRCUMSTANCES IN WHICH SUCH PURCHASE OR TRANSFER WOULD NOT
CONSTITUTE OR RESULT IN A PROHIBITED TRANSACTION.
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. Any fiduciary of a Plan (including an
entity that is deemed to hold Plan assets for purposes of ERISA and the Tax
Code) 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 Tax Code to such investment
and the availability of the Exemption.
THE SALE OF SENIOR CERTIFICATES TO A PLAN IS IN NO RESPECT A
REPRESENTATION BY THE DEPOSITOR, THE UNDERWRITER OR ANY OTHER MEMBER OF THE
RESTRICTED GROUP 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.
EXEMPT PLAN
A governmental plan as defined in Section 3(32) of ERISA is not subject
to ERISA or Tax Code Section 4975. However, such a governmental plan may be
subject to a Similar Law. A fiduciary of a governmental plan should make its own
determination as to the need for and the availability of any exemptive relief
under any Similar Law.
UNRELATED BUSINESS TAXABLE INCOME; RESIDUAL CERTIFICATES
The purchase of a Residual Certificate by any employee benefit plan
qualified under Tax Code Section 401(a) and exempt from taxation under Tax Code
Section 501(a), including most varieties of ERISA Plans, may give rise to
"unrelated business taxable income" as described in Tax Code Sections 511-515
and 860E. Further, before the purchase of Residual Certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a Residual Certificate on behalf of, a "Disqualified
Organization," which term as defined above under the caption "Material Federal
Income Tax Consequences" in the Prospectus includes certain tax-exempt entities
not subject to Tax Code Section 511, including certain governmental plans, as
discussed in the section in the prospectus titled "Material Federal Income Tax
Consequences." Accordingly, Plans may not purchase Residual Certificates.
LEGAL INVESTMENT
The Class A-1, Class A-2, and Class B Certificates will be
mortgage-related securities for purposes of the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"). The appropriate characterization of the
Certificates under various
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legal investment restrictions, and thus the ability of investors subject to
these restrictions to purchase the Certificates, may be subject to significant
interpretive uncertainties.
The Depositor makes no representations as to the proper
characterization of the Certificates for legal investment purposes, financial
institution regulatory purposes or other purposes or as to the ability of
particular investors to purchase the Certificates under applicable legal
investment restrictions. These uncertainties may adversely affect the liquidity
of the 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 Certificates
constitute a legal investment or are subject to investment, capital or other
restrictions.
PLAN OF DISTRIBUTION
Prudential Securities Incorporated and ___________________. (together
referred to herein as the "Underwriter") have agreed, severally and not jointly,
pursuant to an Underwriting Agreement dated _________, 1999 (the "Underwriting
Agreement"), to purchase from the Depositor the principal or notional balances
of Certificates set forth below.
AGGREGATE INITIAL
CLASS CERTIFICATE BALANCE
----- -------------------
Class A-1.........................
Class A-2.........................
Class B...........................
Class C...........................
Class D...........................
Class E...........................
The Underwriter has informed the Transferor and Depositor that it
proposes to offer the Offered Certificates for sale from time to time in one or
more negotiated transactions, or otherwise, at varying prices to be determined,
in each case, at the time of the related sale. The Underwriter may effect such
transactions by selling such Certificates to or through dealers, and such
dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriter or purchasers of the
Certificates for whom they may act as agent. The Underwriter and any dealers
that participate with the Underwriter in the distribution of the Certificates
purchased by the Underwriter may be deemed to be underwriters, and any discounts
or commissions received by them and any profit on the resale of Certificates by
them or the Underwriter may be deemed to be underwriting discounts or
commissions under the 1933 Act.
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent and the Underwriter will
be obligated to purchase all of the Certificates if any are purchased.
The Underwriter is an affiliate of the Transferor, and therefore will
also receive an additional indirect economic benefit from this transaction (that
is, an interest in the profit made by the Transferor on its sale of the Mortgage
Loans to the Depositor).
The Depositor has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the 1933 Act, or contribute to payments
that the Underwriter may be required to make in respect thereof.
The Underwriter has advised the Depositor that it currently expects to
make a market in the Certificates, although it has no obligation to do so. Any
market making may be discontinued at any time, and there can be no assurance
that an active
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public market for the Certificates will develop. For further
information regarding any offer or sale of the Certificates pursuant to this
Prospectus Supplement and the Prospectus, see "Plan of Distribution" in the
Prospectus.
USE OF PROCEEDS
The Depositor will apply the net proceeds from the sale of Certificates
to pay the purchase price of the Mortgage Loans, to repay indebtedness that has
been incurred to obtain funds to acquire the Mortgage Loans and to pay costs of
structuring, issuing and underwriting the Certificates.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and for the
Underwriter by O'Melveny & Myers LLP.
RATINGS
It is a condition to the issuance of the Offered Certificates that each
such class of Certificates be assigned the ratings indicated on the cover hereof
by Fitch and by Moody's, respectively.
The Rating Agencies' ratings on mortgage pass-through certificates
address the likelihood of the receipt by holders of payments of interest and
principal to which they are entitled by the Rated Final Distribution Date. The
Rating Agencies' ratings take into consideration the credit quality of the
mortgage pool, structural and legal aspects associated with the Certificates,
and the extent to which the payment stream in the mortgage pool is adequate to
make payments required under the Certificates. Ratings on mortgage pass-through
certificates do not, however, represent an assessment of the likelihood, timing
or frequency of principal prepayments by borrowers or the degree to which such
prepayments (both voluntary and involuntary) 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 or the timing of the receipt thereof or the
likelihood of collection by the Master Servicer of Default Interest. In general,
the ratings thus address credit risk and not prepayment risk.
There can be no assurance as to whether any rating agency not requested
to rate the Certificates will nonetheless issue a rating and, if so, what such
rating would be. A rating assigned to the 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 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.
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INDEX OF SIGNIFICANT DEFINITIONS
Definitions Page
- ----------------
Advance Rate.............................................................
Annual Debt Service......................................................
Anticipated Repayment Date...............................................
Appraisal Reduction......................................................
Appraisal Reduction Event................................................
Appraisal Reduction Excess Collections...................................
Appraised LTV............................................................
Appraised Value..........................................................
ARD Loans................................................................
Asset Status Report......................................................
Assumed Scheduled Payments...............................................
Available Funds..........................................................
Available Funds Allocation...............................................
Balloon Amount...........................................................
Balloon Balance..........................................................
Balloon Loans............................................................
Balloon/ARD LTV..........................................................
Base Interest Fraction...................................................
Beneficial Owners........................................................
Book-Entry Certificates..................................................
Cash Flow................................................................
Casualty.................................................................
Certificate Registrar....................................................
Class Interest Distribution Amount.......................................
Class Interest Shortfall.................................................
Closing Date.............................................................
Collection Account.......................................................
Collection Period........................................................
Condemnation.............................................................
Condemnation Proceeds....................................................
Corrected Mortgage.......................................................
Cross-Defaulted Loans....................................................
Cut-off Date.............................................................
Debt Service Coverage Ratios.............................................
Default Interest.........................................................
Default Rate.............................................................
Definitive Certificate...................................................
Depositor................................................................
Disposition Fee..........................................................
Distribution Account.....................................................
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Distribution Date........................................................
DSCR.....................................................................
DTC......................................................................
Due Date.................................................................
Eligible Bank............................................................
ERISA....................................................................
ESA......................................................................
Excess Cash Flow.........................................................
Excess Interest..........................................................
Final Recovery Determination.............................................
Form 8-K.................................................................
Ground Leases............................................................
Indirect Participants....................................................
Initial Pool Balance.....................................................
Insurance Proceeds.......................................................
Interest Accrual Period..................................................
Liquidation Proceeds.....................................................
Loan-to-Value Ratio......................................................
Lockout Period...........................................................
LTV......................................................................
Major Tenant.............................................................
Master Servicer..........................................................
Mobile Home ParK.........................................................
Monthly Payment..........................................................
Mortgage File............................................................
Mortgage Loan Purchase Agreement.........................................
Mortgage Loans...........................................................
Mortgage Pool............................................................
Mortgage Property........................................................
Mortgage Rate............................................................
Multifamily..............................................................
Net Mortgage Rate........................................................
Net Operating Income.....................................................
Net REO Proceeds.........................................................
NOI......................................................................
Nonrecoverable Advance...................................................
Nursing Home.............................................................
Occupancy Rate...........................................................
Open.....................................................................
P&I Advance..............................................................
P&I Certificates.........................................................
Participants.............................................................
Pass-Through Rate........................................................
Paying Agent.............................................................
Permitted Investments....................................................
Plan Asset Regulations...................................................
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Plan of Distribution.....................................................
Plans....................................................................
Pool Balance.............................................................
Pooled Principal Distribution Amount.....................................
Pooling and Servicing Agreement..........................................
Prepayment Description...................................................
Prepayment Interest Shortfall............................................
Prepayment Interest Surplus..............................................
Prepayment Premium Period................................................
Prepayment Premiums......................................................
Principal Prepayments....................................................
Property Advances........................................................
Record Date..............................................................
Remaining Amortization Term..............................................
Remaining Term to Maturity...............................................
REMIC....................................................................
Remittance Date..........................................................
REO Account..............................................................
REO Mortgage Loan........................................................
REO Property.............................................................
Restricted Group.........................................................
Retail-Anchored..........................................................
Retail-Shadow Anchored...................................................
Retail-Single Tenant.....................................................
Retail-Unanchored........................................................
Revised Rate.............................................................
Scheduled Final Distribution Date........................................
Scheduled Principal Balance..............................................
Self-Storage.............................................................
Senior Principal Distribution Cross-Over Date............................
Servicing Fee............................................................
Servicing Fee Rate.......................................................
Similar Law..............................................................
SMMEA....................................................................
Special Servicer.........................................................
Special Servicing Fee....................................................
Tax Code.................................................................
Trustee..................................................................
Trustee Mortgage File....................................................
Underlying Mortgage Loan Purchase Agreements.............................
Underwriter..............................................................
Underwriting Agreement...................................................
Underwritten Cash Flow...................................................
Underwritten DSCR........................................................
Underwritten Net Cash Flow...............................................
Underwritten NOI.........................................................
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Underwritten NOI DSCR....................................................
Unscheduled Payments.....................................................
Warehouse................................................................
Weighted Average Maturity................................................
Weighted Average Net Mortgage Rate.......................................
Workout Fee..............................................................
Year Built...............................................................
Year Renovated...........................................................
Yield and Maturity Considerations........................................
Yield Maintenance Charge.................................................
Yield Maintenance Period.................................................
Yield Rate...............................................................
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ANNEX A
EXPLANATORY NOTES
Shaded Loans signify either single notes secured by multiple mortgages, or
cross-collateralized/cross-defaulted notes and mortgages.
Crossed loans include a summation of certain loan parameters (e.g., Cut-off date
balance) on the top line of the loan group, therefore some loan totals are
duplicated and must be adjusted to attain portfolio totals.
Sets of Mortgage Loans that have identical numeric coding designate multiple
Mortgage Loans that are cross-collateralized and cross-defaulted.
Certain ratios including Cut-off Date Balance/Unit or SF, DSCR, LTV and Balloon
LTV are calculated on a combined basis for Mortgage Loans that are secured by
multiple Mortgaged Properties or are cross-collateralized and cross-defaulted.
"ARD" indicates the Anticipated Repayment Date.
The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related note. For those
Mortgage Loans utilizing an actual/360 interest calculation methodology, the
actual amortization to a zero balance may require more monthly payments than
indicated.
In general for each Mortgaged Property, "Physical Occupancy Percent" was
determined based on a rent roll provided by the related borrower. In certain
cases, "Physical Occupancy Percent" was determined based on an appraisal,
operating statement or occupancy report.
"Largest Tenant" refers to the tenant that represents the greatest percentage of
the total square footage at the related Mortgaged Property.
"Prepayment Description" indicates prepayment provisions from the first
regularly scheduled payment date, as stated in the Mortgage Loan. "YM"
represents yield maintenance. "YM1", "YM2", "YM3" and "YM5" represent the
greater of yield maintenance or one percent, two percent, three percent and five
percent of the outstanding principal balance at such time, respectively. The
stated percentages represent specified percentage Prepayment Premiums. "Open"
represents a period during which principal prepayments are permitted without
payment of a Prepayment Premium. For each Mortgage Loan, the sum of the numbers
set forth under the Prepayment Description category represents the number of
months in the original term to maturity.
"Seasoning" represents the approximate number of months elapsed from the date of
the first regularly scheduled payment to the Cut-Off Date.
All Mortgage Loans (except for the Mortgage Loan, Control No. 256) are first
liens secured by mortgages on commercial or multi-family residential properties.
NOI numbers which are blank were either not available or were obtained from a
period of time that such information was not comparable.
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<PAGE>
ANNEX A
LOAN CHARACTERISTICS
Shaded Mortgage Loans signify either single notes secured by multiple Mortgages,
or cross-collateralized/cross-defaulted notes and Mortgages.
Crossed loans (i.e., cross-collateralized or cross-defaulted Mortgage Loans)
include a summation of certain loan parameters (e.g. Cut-off Date Balance) on
the top line of the loan group, therefore some loan totals are duplicated and
must be adjusted to attain portfolio totals.
"___", "____", and "____" denote __________________________ and ______________,
respectively, as Mortgage Loan Originators.
Certain ratios including Cut-off Date Balance/Unit or SF, DSCR, LTV and Balloon
LTV are calculated on a combined basis for Mortgage Loans that are secured by
multiple Mortgaged Properties or are cross-collateralized and cross-defaulted.
"ARD" indicates the Anticipated Repayment Date.
The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related Note. For those
Mortgage Loans utilizing an actual/360 interest calculation methodology, the
actual amortization to a zero balance may require more monthly payments than
indicated.
"Largest Tenant Name" refers to the tenant that represents the greatest
percentage of the total square footage at the related Mortgaged Property.
YM represents yield maintenance. "YM1", "YM2", "YM3" , "YM4" and "YM5" represent
the greater of yield maintenance or one percent, two percent, three percent,
four percent and five percent of the outstanding principal balance at such time,
respectively. The stated percentages represent specified Prepayment Premiums.
"Open" represents a period during which principal prepayments are permitted
without payment of a Prepayment Premium. For each Mortgage Loan, the sum of the
numbers set forth under the Prepayment Description category represents the
number of months in the original term to maturity.
"LO" denotes that a Mortgage Loan is locked out for a period during which
prepayment is not permitted.
"DEF" denotes defeasance and indicates that a loan may be defeased only during
the indicated period.
Yield Maintenance Description provides a summation of the calculation of any
yield Maintenance Charge. [Note that with respect to Mortgage Loan Control #___,
the Yield Maintenance Charge is calculated as the Treasury Rate plus _____ basis
points per annum.]
"Seasoning" represents the approximate number of months elapsed from the date of
the first regularly scheduled payment to the Cut-off Date.
Missing NOI data points occur because the data was not available or because they
apply to a time period that is not comparable to other Mortgage Loans in the
Mortgage Loan Pool.
Due on Sale provides a confirmation that exercises at the related lender's
option with a fee payable for such option.
Fixed Loan Type identifies that interest will accrue on the balance of the
related Mortgage Loan at the indicated fixed coupon during the term of the loan.
"NAP" denotes data is not applicable
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Current LTV Ratio is calculated using the original appraised value and the
Cut-off Date Mortgage Loan Balance.
All reserve holdback balances, monthly reserves and monthly escrows were
obtained from the servicer.
[1998 NOI - Generally, 1996 and 1997 NOI indicates a January through
December calendar year. 1998 NOI may be calculated on any one of the three
following methods.
January through December calendar year.
Trailing twelve months ending in the last six months of 1998.
At least eight months annualized.]
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ANNEX B
ADDITIONAL LOAN CHARACTERISTICS
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<PAGE>
ANNEX C
AFFILIATED BORROWERS
PERCENT
CUT-OFF RELATIONSHIP OF CROSS COLLATERALIZED AND
MORTGAGE LOAN CONTROL # BALANCE BORROWER CROSS DEFAULTED
- ----------------------- ------- -------- ---------------
121
137
144
124
124a
124b
127a
127b
127c
132a
132b
148a
148b
133
147
149
150
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<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the Prospectus Supplement and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Depositor or the Underwriter. This Prospectus Supplement and the Prospectus
Supplement 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 Supplement nor any sale
made hereunder shall, under any circumstances, create an implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of the Depositor since such date.
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 1999-____
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
PROSPECTUS SUPPLEMENT
PRUDENTIAL SECURITIES
________, 1999
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<PAGE>
The information contained herein is not complete and may be changed. This
prospectus supplement is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
PROSPECTUS
- --------------------------------------------------------------------------------
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
Depositor
COMMERCIAL/MULTIFAMILY MORTGAGE PASS-THROUGH CERTIFICATES
(Issuable in Series)
- --------------------------------------------------------------------------------
THE OFFERING-
Prudential Securities Secured Financing Corporation from time to time will offer
Commercial/Multifamily Mortgage Pass-Through Certificates in different series by
means of this prospectus and a separate prospectus supplement for each series.
THE TRUST FUNDS-
A new trust fund will be established to issue each series of certificates. Each
trust fund will consist of:
o a pool of mortgage loans secured by liens on commercial and/or multifamily
residential properties; and
o other assets specified in the accompanying prospectus supplement, including
any credit enhancement, participation interests in mortgage loans,
installment contracts for the sale of mortgaged properties or mortgage
pass-through certificates.
THE CERTIFICATES-
o will represent interests in the related trust fund and will be paid only
from the related trust fund assets;
o offered by this prospectus and the accompanying prospectus supplement will
be rated in one of the four highest rating categories by at least one
nationally recognized rating organization;
o may have the benefit of credit enhancement; and
o will be issued as part of a designated series which may include one or more
classes, which may have different interest rates and may receive principal
payments in differing proportions and at different times.
================================================================================
BEFORE YOU PURCHASE ANY OF THESE SECURITIES, BE SURE YOU UNDERSTAND THE
STRUCTURE OF THE TRANSACTION AND THE RISKS. SEE ESPECIALLY THE RISK FACTORS
BEGINNING ON PAGE 10 OF THIS PROSPECTUS.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE CERTIFICATES OR DETERMINED THAT
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
The securities to be issued are asset backed certificates issued by a trust. The
securities represent interests only in the related trust fund and do not
represent interests in or obligations of Prudential Securities Secured Financing
Corporation or any of its affiliates. Unless otherwise specified in the
accompanying prospectus supplement, neither the certificates nor the underlying
assets are insured or guaranteed by any governmental agency or other person.
- --------------------------------------------------------------------------------
This prospectus may be used to offer and sell any series of certificates only if
accompanied by the prospectus supplement for that series.
,1999
1
<PAGE>
TABLE OF CONTENTS
PAGE
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT...............................
WHERE YOU CAN FIND MORE INFORMATION........................................
REPORTS ...................................................................
SUMMARY OF PROSPECTUS......................................................
RISK FACTORS...............................................................
THE DEPOSITOR..............................................................
USE OF PROCEEDS............................................................
DESCRIPTION OF THE CERTIFICATES............................................
THE MORTGAGE POOLS.........................................................
SERVICING OF THE MORTGAGE LOANS............................................
CREDIT ENHANCEMENT.........................................................
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS................................
MATERIAL FEDERAL INCOME TAX CONSEQUENCES...................................
STATE AND OTHER TAX CONSIDERATIONS.........................................
ERISA CONSIDERATIONS.......................................................
LEGAL INVESTMENT...........................................................
PLAN OF DISTRIBUTION.......................................................
LEGAL MATTERS..............................................................
FINANCIAL INFORMATION......................................................
RATING ....................................................................
INDEX OF SIGNIFICANT DEFINITIONS...........................................
2
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the certificates in two separate
documents, this prospectus, which provides general information, some of which
may not apply to a particular series of certificates, including your series; and
the accompanying prospectus supplement, which will describe the specific terms
of the series of certificates being offered to you (the "offered certificates").
IF WE DESCRIBE THE TERMS OF THE SERIES OF OFFERED CERTIFICATES
DIFFERENTLY IN THIS PROSPECTUS THAN WE DO IN THE ACCOMPANYING PROSPECTUS
SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE PROSPECTUS SUPPLEMENT.
You should rely only on the information provided in this prospectus and
the accompanying prospectus supplement, including the information incorporated
by reference. We have not authorized anyone to provide you with different
information. We are not offering the certificates in any state where the offer
is not permitted.
We have included cross-references to captions in these materials where
you can find further related discussions that we believe will enhance your
understanding of the topic being discussed. The Table of Contents of this
prospectus and the Table of Contents included in the accompanying prospectus
supplement list the pages on which these captions are located. You can also find
references to key topics in the Table of Contents on the preceding page.
We have started with several introductory sections describing the trust
fund and the certificates in abbreviated form, followed by a more complete
description of the terms. The introductory sections are:
* Summary of Prospectus--gives a brief introduction to the certificates
to be offered and the related trust fund and mortgage loans; and
* Risk Factors--describes briefly some of the risks to investors of a
purchase of the certificates.
You can find a listing of the pages where capitalized terms used in
this prospectus are defined under the caption "Index of Significant Definitions"
beginning on page 85 in this prospectus.
Whenever we use words like "intends," anticipates" or "expects" or
similar words in this prospectus, we are making a forward-looking statement, or
a projection of what we think will happen in the future. Forward-looking
statements are inherently subject to a variety of circumstances, many of which
are beyond our control that could cause actual results to differ materially from
what we think they might be. Any forward-looking statements in this prospectus
speak only as of the date of this prospectus. We do not assume any
responsibility to update or review any forward-looking statement contained in
this prospectus to reflect any change in our expectation with respect to the
subject of such forward-looking statement or to reflect any change in events,
conditions or circumstances on which any such forward-looking statement is
based.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement (including this prospectus and the prospectus
supplement). This prospectus and the accompanying prospectus supplement do not
contain all of the information contained in the registration statement. For
further information regarding the documents referred to in this prospectus and
the accompanying prospectus supplement, you should refer to the registration
statement and the exhibits to the registration statement. The registration
statement and the exhibits can be inspected and copied at the Public Reference
Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and the Sec's
regional offices at Seven World Trade Center, 13th Floor, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1500, Chicago,
Illinois 60661. Copies of these materials can be obtained at prescribed rates
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington D.C. 20549. In addition, the SEC maintains a public access site on
the Internet through the World Wide Web at which site reports, information
statements and other information, including all electronic filings, may be
viewed. The Internet address of such World Wide Web site is http://www.sec.gov.
The SEC allows us to "incorporate by reference" information that the
depositor files with it, which means that the depositor can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus and the
accompanying prospectus supplement. Information that the
3
<PAGE>
depositor files later with the SEC will automatically update the information in
this prospectus and the accompanying prospectus supplement. In all cases, you
should rely on the later information over different information included in this
prospectus or the accompanying prospectus supplement. The depositor incorporates
by reference any future annual, monthly and special reports and proxy materials
filed with respect to any trust fund until we terminate offering the
certificates. The depositor has determined that its financial statements are not
material to the offering of any of the certificates. See "Financial
Information." As a recipient of this prospectus, you may request a copy of any
document the depositor incorporates by reference, except exhibits to the
documents (unless the exhibits are specifically incorporated by reference), at
no cost, by writing or calling: Prudential Securities Secured Financing
Corporation, One New York Plaza, New York, New York 10292, attention: David
Rodgers, (212) 214-1000.
REPORTS
You will receive statements containing information regarding principal
and interest payments and the related trust fund, as described in this
prospectus and the applicable prospectus supplement for each series of
certificates, in connection with each distribution and annually. Any financial
information in those reports will most likely not have been examined or reported
upon by an independent public accountant. For more information, you should refer
to the section in this prospectus titled "Description of the Certificates-
Reports to Certificateholders." The master servicer for each series of
certificates will deliver periodic statements containing certain information
relating to the mortgage loans to the related trustee, and, in addition, will
deliver to the trustee on a yearly basis a statement from a firm of independent
public accountants regarding the examination of certain documents and records
relating to the servicing of the mortgage loans in the related trust fund. For
more information, you should refer to the section in this prospectus titled
"Servicing of the Mortgage Loans-Evidence of Compliance." Copies of the monthly
and annual statements provided by the master servicer to the trustee will be
delivered to certificateholders of each series of certificates upon request
addressed to the depositor's principal executive offices located at Prudential
Securities Secured Financing Corporation, One New York Plaza, New York, New York
10292, attention: David Rodgers, (212) 214-1000.
4
<PAGE>
SUMMARY OF PROSPECTUS
This summary includes selected information from this prospectus. It
does not contain all of the information you need to consider in deciding whether
to buy any class of the offered Certificates. To understand the terms of the
offering of the offered certificates, you should read carefully this entire
prospectus and the accompanying prospectus supplement.
TITLE OF CERTIFICATES................ Commercial/Multifamily Mortgage
Pass-Through Certificates, issuable in
series.
DEPOSITOR............................ Prudential Securities Secured Financing
Corporation, One New York Plaza, New
York, New York 10292. Its telephone
number is (212) 214-1000.
ISSUER............................... With respect to each series of
certificates, a separate trust fund to be
established by the depositor.
MASTER SERVICER...................... The related prospectus supplement will
name the master servicer for each series
of certificates. See "Servicing of the
Mortgage Loans-General."
SPECIAL SERVICER..................... The related prospectus supplement will
name the special servicer, if any will be
appointed, for each series of
certificates. The related prospectus
supplement will also describe the
circumstances, if any, in which a special
servicer will be appointed. See
"Servicing of the Mortgage
Loans-General."
TRUSTEE.............................. The related prospectus supplement will
name the trustee for each series of
certificates. See "Description of the
Certificates-The Trustee."
THE TRUST FUNDS...................... Each trust fund will primarily consist of
the following:
o MORTGAGE POOL-A pool of mortgage loans,
which may include participation
interests in mortgage loans, mortgage
pass-through or collateralized mortgage
obligation certificates, installment
contracts and certificates issued or
guaranteed by certain United States
governmental agencies. Each mortgage
loan will constitute the obligation of
one or more persons to repay a
specified sum with interest and will be
secured by first or junior mortgages,
deed of trust or similar security
instruments on, or installment
contracts for the sale of, commercial
or multifamily residential property.
Commercial or multifamily residential
property may include fee simple or
leasehold interests in property
improved by office buildings,
health-care related properties,
congregate care facilities, hotels and
motels, industrial properties,
warehouse, mini-warehouse, and
self-storage facilities, mobile home
parks, multifamily properties,
cooperative apartment buildings,
nursing homes, office/retail
properties, anchored retail properties,
single-tenant properties, unanchored
retail properties and other commercial
real estate properties, multifamily
residential properties, each of which
may be located in any or all states and
the U.S. Virgin Islands. The mortgage
loans will not be guaranteed or insured
by the depositor or any of its
affiliates. The prospectus supplement
will indicate whether the mortgage
loans will be guaranteed or insured by
any governmental agency or
instrumentality or other person. All
mortgage loans will have been
purchased, either directly or
indirectly, by the depositor on or
before the initial issuance date of the
related series of certificates.
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<PAGE>
For a more detailed description of the
mortgage loans, including such matters
as the manner in which payments are
applied, and whether prepayments are
prohibited or allowed only with the
payment of a premium or a yield
maintenance penalty, you should refer
to the section of this prospectus
titled "The Mortgage Pools" and the
section titled in the accompanying
prospectus supplement "Description of
the Mortgage Pool."
o ACCOUNTS-
o COLLECTION ACCOUNT--The master
servicer will establish and maintain
a collection account on behalf of the
certificateholders. Generally,
payments received on the mortgage
loans will be deposited into the
collection account.
o DISTRIBUTION ACCOUNT--The trustee
will establish and maintain a
distribution account on behalf of the
certificateholders. The master
servicer generally will deposit into
the distribution account amounts held
in the collection account to pay
principal and interest on the
certificates in the manner described
in the related prospectus supplement.
For a more detailed description of
the accounts, you should refer to the
section in this prospectus entitled
"Description of the Certificates -
Accounts".
o CREDIT ENHANCEMENT- Certain classes of
a series of certificates may have the
benefit of credit enhancement intended
to increase the likelihood of payments
on those certificates. Credit
enhancement may be in the form of a
letter of credit, a liquidity facility,
the subordination of one or more other
classes of a series of certificates,
reserve funds, overcollateralization,
surety bonds, certificate guarantee
insurance, or other types of credit
support. It is unlikely that credit
enhancement will protect against all
risks of loss. Credit enhancement
cannot guarantee that losses will not
be incurred on the certificates. The
applicable prospectus supplement will
describe the amount and types of credit
enhancement, the identity of any entity
providing credit enhancement, the
limitations of credit enhancement and
other information relating to any
credit enhancement.
For a more detailed description of the
credit enhancement, you should refer to
the section in this prospectus titled
"Risk Factors-Limitations on Credit
Enhancement" and "Credit Enhancement."
DESCRIPTION OF CERTIFICATES.......... The certificates of each series will be
issued pursuant to a pooling and
servicing agreement and may be issued in
one or more classes. You will find the
following information about the offered
certificates in the accompanying
prospectus supplement:
o the identity of each class within the
series of certificates;
o the initial principal amount of each
class within the series of
certificates;
o the interest rate applicable to each
class within the series of
certificates;
o the timing, amount and priority or
subordination of principal and interest
payments for each class within the
series of certificates;
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<PAGE>
o any redemption provisions;
o the final scheduled distribution date
for each class within the series of
certificates;
o information about the mortgage loans in
the trust fund relating to the series
of certificates;
o the principal amount of each class of
the series certificates that would be
outstanding if the related mortgage
loans were prepaid at various assumed
rates;
o information about credit enhancement,
if any, for the series of certificates;
o the method of selling the certificates;
and
o other relevant factors.
Each class of certificates will have a
stated certificate balance and may accrue
interest at a specified interest rate.
Each class of certificates may have a
different interest rate, which may be a
fixed, variable or adjustable interest
rate, or any combination of the
foregoing.
Each class of certificates may differ as
to timing and priority of distributions,
seniority, allocations of losses,
interest rate or amount of distributions
of principal or interest, or distribution
of principal or interest upon the
occurrence of specified events or on the
basis of collections from designated
portions of the mortgage loans. In
addition, a series may include one or
more classes of certificates entitled to
(i) distributions in respect of principal
with disproportionate, nominal or no
interest distributions or (ii) interest
distributions with disproportionate,
nominal or no distributions in respect of
principal. Furthermore, a series may
include one or more classes of
certificates entitled to all or a portion
of any remaining payments of principal
and interest on the related mortgage loan
after making all other distributions
required on each distribution date.
Neither the certificates nor the related
mortgage loans will be guaranteed by the
depositor or any of its affiliates.
Unless otherwise specified in the
accompanying prospectus supplement,
neither the certificates nor the related
mortgage loans will be insured or
guaranteed by any governmental agency or
other person.
For a more detailed description of the
sources of payment on the certificates,
you should refer to the sections in this
prospectus titled "Risk Factors- Any
Series of Certificates May Rely Only on
the Assets in its Related Trust Fund For
Payments of Principal and Interest" and
"Description of the Certificates."
<PAGE>
DISTRIBUTIONS ON CERTIFICATES........ Commencing on the date specified in the
related prospectus supplement following
the establishment related trust fund, 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 on the day specified in the
related prospectus supplement. In
general, distributions will include
previously undistributed payments of
principal (including principal
prepayments, if any) and interest on the
mortgage loans received by the master
servicer or the special servicer, if any,
after that date specified in the
accompanying prospectus supplement and
prior to the date specified in the
accompanying prospectus supplement for
each distribution date.
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<PAGE>
ADVANCES............................. The obligations, if any, of the master
servicer and the special servicer, if
any, as part of their servicing
responsibilities, to make certain
advances with respect to delinquent
payments on the mortgage loans, payments
of taxes, assessments, insurance premiums
and other required payments will be set
forth in the section of the accompanying
prospectus supplement titled "The Pooling
and Servicing Agreement - Advances."
TERMINATION.......................... The obligations of the parties to the
pooling and servicing agreement for each
series will terminate upon: (1) the
purchase of all of the assets of the
related trust fund, as described in the
related prospectus supplement; (2) 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 pooling and
servicing agreement; (3) 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 pooling
and servicing agreement; or (4) mutual
consent of the parties and all
certificateholders.
For more detailed description of the
termination of the Pooling and Servicing
Agreement, you should refer to the
section in the accompanying prospectus
supplement titled "Description of
Certificates - Termination."
TAX STATUS OF THE CERTIFICATES....... The certificates will be either (1)
"Regular Interests" and "Residual
Interests" in a trust fund treated as a
real estate mortgage investment conduit
under Sections 860A through 860G of the
Internal Revenue Code of 1986, or (2)
interests in a trust fund treated as a
grantor trust under applicable provisions
of such Internal Revenue Code.
For a more detailed description of the
tax status of the certificates, you
should refer to the sections in this
prospectus and the accompanying
prospectus supplement titled "Material
Federal Income Tax Consequences."
ERISA CONSIDERATIONS................. If you are a fiduciary of any employee
benefit plan or other retirement
arrangement subject to the Employee
Retirement Income Security Act of 1974,
or Section 4975 of the Internal Revenue
Code, you should carefully review with
your own legal advisors whether the
purchase or holding of certificates of
any series would give rise to a
transaction prohibited or not otherwise
permissible under such statutes. In
addition, you should review the
discussion in the sections titled "ERISA
Considerations" in this prospectus and in
the accompanying prospectus supplement
before investing in the certificates.
LEGAL INVESTMENT..................... The accompanying prospectus supplement
will indicate whether the offered
certificates will be "mortgage related
securities" for purposes of the Secondary
Mortgage Market Enhancement Act of 1984.
If your investment authority is subject
to legal restrictions, you should
carefully review with your own legal
advisors whether and to what extent you
can legally invest in the certificates.
In addition, you should review the
discussion in the sections titled "Legal
Investment" in this prospectus and in the
accompanying prospectus supplement before
investing in the certificates.
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<PAGE>
RATING............................... Each class of a series of offered
certificates will be rated not lower than
investment grade by one or more
nationally recognized statistical rating
agencies at the date of issuance.
For a more detailed description of the
ratings on the certificates, you should
refer to the sections in this prospectus
and the related prospectus supplement
titled "Rating."
9
<PAGE>
RISK FACTORS
You should carefully consider the following risks and those in the
accompanying prospectus supplement under "Risk Factors" before making an
investment decision. Your investment in the offered certificates will involve
some degree of risk. If any of the following risks are realized, your investment
could be materially and adversely affected. In addition, other risks unknown to
us or which we currently consider immaterial may also impair your investment.
- --------------
YOU MAY HAVE DIFFICULTY A secondary market for the certificates of any
RESELLING YOUR CERTIFICATES series may not develop or, if it does develop, may
not continue or be significantly liquid to allow
you to resell any of your certificates. The absence
of a secondary market for the certificates could
limit your ability to resell them. There have been
times in the past where there have been very few
buyers of asset backed certificates (that is, there
has been a lack of liquidity), and there may be
such times in the future. This means that if in the
future you want to sell any of the certificates,
before they mature, you may not be able to find a
buyer or, if you find a buyer, the selling price
may be less than it would have been if a secondary
market existed for the certificates. In addition,
the market value of the certificates may fluctuate
with changes in prevailing rates of interest.
- --------------
ANY SERIES OF CERTIFICATES The certificates will not be guaranteed by the
MAY RELY ONLY ON THE ASSETS 1depositor or any of its affiliates. The only
IN ITS RELATED TRUST FUND sources of funds for payment on a series of
FOR PAYMENTS OF PRINCIPAL certificates will generally be the assets of the
AND INTEREST related trust fund and, to the extent provided in
the related prospectus supplement, any credit
enhancement. A portion of the amounts remaining in
certain funds or accounts, including the
distribution account, the collection account and
reserve funds, may be withdrawn under certain
conditions, as described in the related prospectus
supplement. A series of certificates will have a
claim against or security interest in the trust
funds for another series only if so specified in
the related prospectus supplement. As a result, you
may suffer a loss on your certificates if such
sources for payment are insufficient to pay all the
principal of and interest on the certificates.
- --------------
SUBORDINATION OF CERTAIN If so provided in the related prospectus
CERTIFICATES MAY RESULT IN supplement, distributions of interest and principal
REDUCED PAYMENTS TO THOSE on one or more classes of a series of certificates
CERTIFICATES may be subordinated in priority of payment to
distributions of interest and principal due on one
or more other classes of that series of
certificates. Subordination has the effect of
increasing the likelihood of payment on the senior
classes of that series of certificates and
decreasing the likelihood of payment on that
subordinated class of certificates. If there are
losses in the collection of principal of or
interest on mortgage loans or shortfalls upon
foreclosure on the security for such mortgage
loans, the amount of those losses or shortfalls
will be borne first by one or more classes of the
subordinated certificates. The remaining amount of
those losses or shortfalls, if any, will be borne
by the remaining classes of certificates in the
priority and subject to the limitations specified
in the related prospectus supplement. In addition,
any credit enhancement may be used by the
certificates of a higher priority of payment before
the principal of the lower priority classes of
certificates of that series has been repaid.
Therefore, the impact of significant losses in the
collection of the mortgage loans and shortfalls
upon foreclosure on the security for the mortgage
loans may fall primarily upon those classes of
certificates with a lower payment priority.
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LIMITATIONS ON CREDIT The prospectus supplement for a series of
ENHANCEMENT certificates will describe any credit enhancement
in the related trust fund, such as letters of
credit, insurance policies, surety bonds, limited
guarantees, reserve funds or other types of credit
support. Credit enhancement will be subject to the
conditions and limitations described in this
prospectus and in the related prospectus supplement
and is not expected to cover all potential losses
or risks or guarantee repayment of principal of and
interest on the certificates.
Credit enhancement cannot guarantee that losses
will not be incurred on the certificates,
particularly for classes of a series of
certificates that may have a lower priority of
payments of principal and interest, be subordinated
to other classes, or share a limited amount of one
form of credit enhancement with other series of
certificates.
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<PAGE>
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MORTGAGE LOANS ARE NOT
GUARANTEED No mortgage loan is insured or guaranteed by the
United States of America, any governmental agency
or instrumentality or any private mortgage insurer.
None of the mortgage loans are insured or
guaranteed by the depositor, the transferor, the
mortgage loan sellers, the master servicer, the
special servicer, the trustee or any of their
respective affiliates.
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RISK THAT PREPAYMENTS OR In deciding whether to purchase any offered
PURCHASES OF MORTGAGE LOANS certificates, you should make an independent
WILL ADVERSELY AFFECT decision as to the appropriate prepayment
AVERAGE LIFE AND YIELDS OF assumptions to be used. Your pre-tax return on your
THE CERTIFICATES investment will change from time to time for a
number of reasons including the following:
-- The rate of return of principal is uncertain.
The amount of distributions of principal of
the certificates and the times when you
receive those distributions depends on the
amount and the times at which borrowers make
principal payments of the underlying mortgage
loans, and on whether the depositor or the
servicer purchases the underlying mortgage
loans.
Prepayments of the mortgage loans in any trust
fund by the related borrowers generally will
result in a faster rate of principal payments
on one or more classes of the related
certificates than if payment on those mortgage
loans were made as scheduled. The prepayment
rate on mortgage loans may be influenced by a
variety of economic, tax, legal and social
factors. While a certain prepayment rate may
be used for the purpose of pricing the
certificates, there can be no assurance that
the actual prepayment rate will be faster or
slower than any assumed prepayment rate.
The depositor will be required to repurchase a
mortgage loan from the trust if the depositor
breaches its representations and warranties
with respect to that mortgage loan. In
addition, the servicer may have the option to
purchase the mortgage loans in the trust fund
and under certain circumstances may be
obligated to purchase mortgage loans from the
trust fund under the circumstances described
in the prospectus supplement.
In addition, the master servicer or the
special servicer, under the circumstances
described in the prospectus supplement, may
have the option to extend the maturity of the
mortgage loans following a default, which
would have the effect of extending the life of
the certificates.
-- You bear reinvestment risk. You will bear the
risk that the timing and amount of
distributions on your certificates will
prevent you from attaining your desired yield.
If you receive a payment of principal of the
certificates prior to when you expect, you may
not be able to reinvest that amount at a rate
of interest equal to the interest rate on the
certificates. If prevailing interest rates
fall significantly below the applicable rates
borne by the mortgage loans included in a
trust fund, principal prepayments are likely
to be higher than if prevailing rates remain
at or above the rates borne by those mortgage
loans. The certificates are thus likely to
produce more returns of principal to investors
when market interest rates fall below the
interest rates on the mortgage loans and
produce less returns of principal when market
interest rates are above the interest rates on
the mortgage loans. As a result, you are
likely to receive more money to reinvest at a
time when other investments generally are
producing a lower yield than that on the
certificates, and are likely to receive less
money to reinvest when other investments
generally are producing a higher yield than
that on the certificates.
For more information on principal and prepayments
and their effect on the average life of related
certificates, you should refer to the section in
the accompanying prospectus supplement titled
"Yield and Maturity Considerations."
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<PAGE>
RESTRICTIONS ON VOLUNTARY The restrictions on voluntary prepayments contained
PREPAYMENT MAY PROVE in a promissory note (including lockout periods,
INEFFECTIVE, REDUCING THE yield maintenance charges and prepayment premiums)
YIELD ON YOUR INVESTMENT affect the rate and timing of principal payments
made on the related mortgage loan. Most of the
mortgage loans provide that for a specified amount
of time during which a prepayment of such mortgage
loan is permitted, it must be accompanied by a
yield maintenance charge or other prepayment
premium. The existence of yield maintenance charges
or other prepayment premiums generally will result
in the mortgage loans prepaying at a lower rate.
However, the requirement that a prepayment be
accompanied by a yield maintenance charge or other
prepayment premium may not provide a sufficient
economic disincentive to a borrower seeking to
refinance at a more favorable interest rate (if,
for example, interest rates fall). An obligation to
pay a yield maintenance charge or other prepayment
premium may potentially be unenforceable under
applicable state or federal law (including federal
bankruptcy law). Even if a yield maintenance charge
or prepayment premium is enforceable, the
foreclosure proceeds received with respect to a
defaulted mortgage loan may be insufficient to make
such payment. If either event were to occur, the
yield on your investment may be reduced.
For more information about restrictions on
voluntary prepayments, you should refer to the
section in the accompanying prospectus supplement
titled "Description of the Mortgage Pool--Certain
Terms and Conditions of the Mortgage
Loans--Prepayment Provisions."
The yield and total return on your offered
certificates may differ significantly from your
expectations due to prepayments on the mortgage
loans being higher or lower than you anticipated.
Even if the actual yield is equal to your
anticipated yield, you may not realize your
expected total return on investment or the expected
weighted average life of your certificates.
For more information about certain factors
affecting prepayment of the Mortgage Loans, you
should refer to the section in the accompanying
prospectus supplement titled "Yield and Maturity
Considerations."
The structure of the offered certificates causes
the yield of subordinated classes to be sensitive
to changes in the rates of prepayment of the
mortgage loans and other factors. If you purchase
any class of offered certificates other than the
most senior class of certificates you will not
receive any principal distributions until the
certificate principal balance of each class that is
senior to your class is reduced to zero.
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LIMITED NATURE OF RATINGS The rating assigned by a rating agency to a class
of certificates reflects the rating agency's
assessment of the likelihood that holders of
certificates of that class will receive all
payments to which such certificateholders are
entitled under the certificates. The ratings will
be based on the structural, legal and
issuer-related aspects associated with such
certificates, the nature of the underlying mortgage
loans and the credit quality of the guarantor, if
any. The rating does not constitute an assessment
of the likelihood of principal prepayments by
mortgagors of the loans underlying the
certificates. A rating will not address the
possibility of prepayment at higher rates than
anticipated by an investor which may cause the
investor to experience a lower than anticipated
yield. In extreme cases, holders of stripped
interest certificates may fail to recoup their
initial investments.
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COMMERCIAL AND MULTIFAMILY Your investment decision should take into account
MORTGAGE LOANS ARE SUBJECT that commercial and multifamily mortgage lending
TO SPECIAL RISKS WHICH MAY generally involves risks that are different than
ADVERSELY AFFECT YOUR those faced in connection with other types of
INVESTMENT lending. The following factors, among others,
contribute to these risks:
(1) Larger loans provide lenders with less
diversification of risk and the potential for
greater losses from the delinquency and/or
default of individual loans;
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<PAGE>
(2) Many of the mortgage loans are non-recourse
obligations, the repayment of which is often
solely dependent upon the successful operation
of the related mortgaged properties;
(3) Commercial and multifamily property values and
net operating income can be volatile;
(4) Many of the mortgage loans are balloon loans,
so your investment may be exposed to
additional risks associated with both the
value of the related mortgaged property and
the borrower's ability to obtain new financing
when the balloon payment is due;
(5) An increase in vacancy rates, a decline in
rental rates, or an increase in operating
expenses or necessary capital expenditures may
impair a borrower's ability to repay its loan;
(6) Changes in the general economic climate, an
excess of comparable space in the area, a
reduction in demand for real estate in the
area, the attractiveness of the property to
tenants and guests and perceptions of the
property's safety, convenience and services
may adversely affect the income from and
market value of a mortgaged property; and
(7) Government regulations and changes in real
estate, zoning or tax laws, changes in
interest rate levels or potential liability
under environmental and other laws may affect
real estate values and income.
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AGING, DETERIORATION AND The age, construction quality and design of a
POOR CONSTRUCTION QUALITY particular mortgaged property may affect the
MAY ADVERSELY AFFECT THE occupancy level and the rents or other occupancy
VALUE AND CASH FLOW OF THE fees that may be charged. Poorly constructed
MORTGAGED PROPERTIES mortgaged properties are likely to require more
expenditures for maintenance, repairs and
improvements. Even mortgaged properties that were
well constructed and have been well maintained will
require improvements in order for them to maintain
their value and retain tenants and other occupants.
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LIMITED ADAPTABILITY FOR Some of the mortgaged properties would require
OTHER USES MAY substantial capital expenditures to convert to an
SUBSTANTIALLY LOWER THE alternative use. If the operation of a mortgaged
LIQUIDATION VALUE OF property with this characteristic becomes
CERTAIN MORTGAGED unprofitable due to, among other factors, (1)
PROPERTIES competition, (2) age of the improvements, (3)
decreased demand, and (4) zoning restrictions, and
as a result the borrower becomes unable to meet its
obligations, the liquidation value of any such
mortgaged property may be substantially less than
would be the case if such property were more
readily adaptable to other uses.
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IF A LEASE EXPIRES OR IS We cannot assure you that (1) leases that expire
OTHERWISE TERMINATED, IT can be renewed, (2) the space covered by leases
MAY NOT BE RENEWED IN A that expire or are terminated can be leased in a
TIMELY MANNER OR AT ALL OR timely manner at comparable rents or on comparable
IT MAY BE RENEWED FOR LOWER terms or (3) the borrower will have the cash or be
LEASE PAYMENTS able to obtain the financing to fund any required
tenant improvements. If vacant space in the
mortgaged properties could not be leased for a
significant period of time, if tenants were unable
to meet their lease obligations or if, for any
other reason, rental payments could not be
collected, income from and the market value of the
mortgaged properties would be adversely affected.
If a tenant defaults, delays and costs in enforcing
the lessor's rights could occur. In addition,
certain tenants at the mortgaged properties may be
entitled to terminate their leases or reduce their
rents based upon negotiated lease provisions. For
example, this could occur if an important tenant
known as an "anchor tenant" ceases operations at
the related mortgaged property. If any of these
events occur, we cannot assure you that the
operation of such provisions would not allow a
termination or rent reduction. A tenant's lease may
also be terminated or otherwise affected if
13
<PAGE>
the tenant becomes the subject of a bankruptcy
proceeding.
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THE MORTGAGED PROPERTIES Factors affecting the competitive position of the
FACE COMPETITION FROM mortgaged properties include:
VARIOUS SOURCES, WHICH
COULD ADVERSELY AFFECT THE (1) the existence of similar properties located in
NET OPERATING INCOME AND the same area, which attract similar types of
MARKET VALUES OF THE occupants on the basis of more favorable
PROPERTIES AND THEREFORE, rental rates, location, condition and
ON YOUR INVESTMENT features;
(2) the existence of any oversupply of available
space in a particular market either as a
result of new construction or a decrease in
the number of occupants, which adversely
affects the rental rates for the mortgaged
properties; and
(3) the possibility of other properties being
converted to competitive uses as a result of
trends in the use of property by occupants
(for example, the establishment of more
home-based offices and businesses or the
conversion of warehouse space for multifamily
use).
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POOR MANAGEMENT OF THE The successful operation of the mortgaged
MORTGAGED PROPERTIES MAY properties also depends on the performance of the
ADVERSELY AFFECT THEIR respective property managers of the mortgaged
OPERATION properties. The property managers may be
responsible for:
(1) responding to changes in local market
factors such as competition and patterns of demand;
(2) managing leasing activities such as
planning and implementing the rental rate
structure, including establishing levels of rent
payments; and
(3) ensuring that maintenance and capital
improvements can be carried out in a timely
fashion.
To the extent the property managers do not properly
perform these duties, the cash flow and market
value for the related mortgaged properties could
suffer, which would have an adverse affect on the
certificates.
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IF TENANT LEASES DO NOT Some of the tenant leases, including some of the
CONTAIN ATTORNMENT anchor tenant leases, do not contain provisions
PROVISIONS OR ARE NOT that require the tenant to attorn to, or recognize
SUBORDINATE TO MORTGAGE as landlord under the lease, a successor owner of
LIENS, THE FORECLOSURE the property following foreclosure. Some of the
VALUE OF THE MORTGAGED leases, including some of the anchor tenant leases,
PROPERTY COULD BE ADVERSELY may be either subordinate to the liens created by
AFFECTED the mortgage loans or else contain a provision that
requires the tenant to subordinate the lease if the
mortgagee agrees to enter into a non-disturbance
agreement. In some states, if tenant leases are
subordinate to the liens created by the mortgage
loans and such leases do not contain attornment
provisions, such leases may terminate upon the
transfer of the property to a foreclosing lender or
purchaser at foreclosure. Accordingly, in the case
of the foreclosure of a mortgaged property located
in such a state and leased to one or more desirable
tenants under leases that do not contain attornment
provisions, such mortgaged property could
experience a further decline in value if such
tenants' leases were terminated (for example, if
such tenants were paying above-market rents). If a
mortgage is subordinate to a lease, the lender will
not (unless it has otherwise agreed with the
tenant) possess the right to dispossess the tenant
upon foreclosure of the property. If the lease
contains provisions inconsistent with the mortgage
(for example, provisions relating to application of
insurance proceeds or condemnation awards), the
provisions of the lease will take precedence over
the provisions of the mortgage.
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REGIONAL FACTORS MAY Repayments by borrowers and the market values of
ADVERSELY AFFECT THE VALUE the mortgaged properties could be affected by:
AND CASH FLOW OF MORTGAGED
PROPERTIES (1) economic conditions generally or in the
regions where the borrowers and the mortgaged
properties are located;
(2) conditions in the real estate markets
where the mortgaged properties are located;
(3) changes in governmental rules and fiscal
policies;
(4) natural disasters; and
(5) other factors that 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.
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IF A BORROWER USES THE In general, the borrowers are prohibited from
MORTGAGED PROPERTY AS taking another loan secured by the mortgaged
SECURITY FOR ANOTHER LOAN, property without the mortgagee's approval. The
THE VALUE OF THE MORTGAGED pooling and servicing agreement will permit the
PROPERTY MAY BE REDUCED master servicer and the special servicer to approve
another loan if certain conditions exist, including
approval by each rating agency rating the
certificates. The absence of such conditions may
not become evident, however, until the related
mortgage loan otherwise defaults. If one or more
subordinate liens are imposed on a mortgaged
property or the borrower incurs other indebtedness,
the trust fund is subject to additional risks. Some
of those risks are:
(1) the borrower may defer necessary maintenance
of the mortgaged property in order to pay the
required debt service on the subordinate
financing, and the value of the mortgaged
property may decline as a result;
(2) the borrower may have an incentive (for
example because the interest rate is higher)
to repay the subordinate or unsecured
indebtedness before the mortgage loan thereby
reducing payments to the trust fund;
(3) it may be more difficult for the borrower to
refinance the mortgage loan or to sell the
mortgaged property for the purpose of making
any balloon payment upon the maturity of the
mortgage loan or for the purpose of making a
prepayment in full on or about the anticipated
repayment date in the case of any ARD Loan;
and
(4) additional debt increases the risks that the
borrower could be become insolvent or subject
to bankruptcy or similar proceedings or might
complicate bankruptcy proceedings, delaying
foreclosure on the mortgaged property.
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APPRAISALS AND ENGINEERING In making your investment decision, you should not
REPORTS ARE OF LIMITED rely on appraisals and engineering reports on
VALUE IN HELPING YOU MAKE mortgaged properties as your only indicator of the
YOUR INVESTMENT DECISION actual value or physical characteristics of the
mortgaged properties. In general, appraisals
represent the analysis and opinion of qualified
experts and are not guarantees of present or future
value. Moreover, appraisals seek to establish the
amount a willing buyer would pay a willing seller.
That amount could be significantly higher than the
amount obtained from the sale of a mortgaged
property under a distressed or liquidation sale.
Information regarding the values of the mortgaged
properties as of the cut-off date for a particular
series of certificates is presented in the section
in the accompanying prospectus supplement titled
"Description of the Mortgage Pool--Certain
Characteristics of the Mortgage Pool" for
illustrative purposes only. The architectural and
engineering reports represent the analysis of the
individual engineers or site inspectors at or
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before the origination of the respective mortgage
loans. The reports may not have been updated since
they were originally conducted and may not have
revealed all necessary or desirable repairs,
maintenance or capital improvement items.
- --------------
CHANGES IN ZONING LAWS MAY The mortgaged properties are typically subject to
REDUCE THE VALUE AND INCOME applicable building and zoning ordinances and codes
affecting the construction and use of real
property. Because the zoning laws applicable to a
mortgaged property (including density, use, parking
and set back requirements) are generally subject to
change at any time, certain improvements upon the
mortgaged properties may not comply fully with all
applicable current and future zoning laws. Changes
in zoning laws may limit the ability of the related
borrower to renovate the premises and, in the event
of a substantial casualty loss, rebuild or utilize
the premises "as is." These changes may reduce the
value and income of the mortgaged property.
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A BORROWER'S COSTS OF A borrower may be required to incur costs to comply
COMPLIANCE WITH APPLICABLE with various existing and future federal, state or
LAWS AND REGULATIONS MAY local laws and regulations applicable to the
REDUCE ITS ABILITY TO REPAY related mortgaged property. Such costs, or the
THE MORTGAGE LOAN imposition of injunctive relief, penalties or fines
in connection with the borrower's noncompliance,
could negatively impact the borrower's cash flow
and, consequently, its ability to pay its mortgage
loan.
For more detailed information about regulatory
compliance costs, you should refer to the section
of this prospectus titled "Certain Legal Aspects of
the Mortgage Loans--Americans With Disabilities
Act."
- --------------
A TENANT'S DEFAULT ON ITS Certain of the mortgaged properties are leased
LEASE OF A SINGLE TENANT wholly or in large part to a single tenant or are
PROPERTY COULD REDUCE THE wholly or in large part owner-occupied. If any such
PROPERTY'S VALUE AND ANY tenant failed to perform its obligations under its
CASH FLOW THEREFROM lease (or, in the case of an owner-occupied
mortgaged property, under the related mortgage loan
documents) such a failure could reduce the
property's value and cash flow therefrom and
adversely affect the related borrower's ability to
make payments on the related mortgage loan.
For more information on risks associated with
default of single tenant property, you should refer
to the section in the accompanying proscpectus
supplement titled "Description of the Mortgage
Pool--Certain Characteristics of the Mortgage
Pool--Tenant Matters" and in "Annex A" attached to
the accompanying prospectus supplement.
If a significant portion of a mortgaged property is
leased to a single tenant that tenant vacates or
fails to perform its obligations, the failure of
the borrower to relet the portion of the mortgaged
property will have a greater adverse effect on your
investment than if the mortgaged property were
leased to a greater number of tenants.
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BORROWER'S FAILURE TO MAKE Most of the mortgage loans are balloon loans.
BALLOON PAYMENTS MAY Balloon loans involve a greater risk of default
ADVERSELY AFFECT YOUR than self-amortizing loans. A borrower's ability to
INVESTMENT make a balloon payment typically will depend upon
its ability either to refinance the related
mortgaged property or to sell the mortgaged
property at a price sufficient to allow it to make
the balloon payment. A number of factors at the
time of attempted sale or refinancing affect the
borrower's ability to accomplish either of these
goals, including:
(1) available mortgage rate levels;
(2) the related mortgaged property's fair market
value;
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<PAGE>
(3) the borrower's equity in the related mortgaged
property;
(4) the borrower's financial condition;
(5) the related mortgaged property's operating
history;
(6) tax laws;
(7) prevailing economic conditions; and
(8) the availability of credit for multifamily or
commercial properties.
For more information about risks of default of
Balloon Payments, you should refer to the section
in the accompanying prospectus supplement titled
"Yield and Maturity Considerations--Yield
Considerations--Balloon Payments/ARD Loan
Payments."
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DELINQUENT AND If so provided in the related prospectus
NON-PERFORMING MORTGAGE supplement, the trust fund for a particular series
LOANS MAY INCREASE THE RISK of certificates may include mortgage loans that are
OF YOUR INVESTMENT past due or are non-performing and would be
serviced by a special servicer. The inclusion of
delinquent or non-performing mortgage loans in a
trust fund may increase the risk of defaults and
prepayments on mortgage loans and consequently
adversely affect the yield on that series of
certificates. Certificates may benefit from credit
enhancement if provided in the related prospectus
supplement. However, any credit enhancement may not
cover all losses related to delinquent or
non-performing mortgage loans.
- --------------
RISK OF EXTENSIONS AND To maximize recoveries on defaulted mortgage loans,
MODIFICATIONS OF DEFAULTED a master servicer or special servicer may extend
MORTGAGE LOANS and modify mortgage loans that are in default or
are likely to be in default, particularly with
respect to balloon payments, within the parameters
specified in the related prospectus supplement. A
master servicer or a special servicer may receive
workout fees, management fees, liquidation fees or
other similar fees based on receipts from or
proceeds of such mortgage loans. Although a master
servicer or special servicer generally will be
required to determine that any extension or
modification is reasonably likely to produce a
greater recovery amount than liquidation, there can
be no assurance that any extensions or
modifications or payment of a workout fee will
increase the amount of receipts from mortgage loans
that are in default or are likely to be in default.
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RISKS RELATED TO THE Mortgage loans made to partnerships, corporations
MORTGAGOR'S FORM OF ENTITY or other entities may entail risks of loss from
AND SOPHISTICATION delinquency and foreclosure that are greater than
those of mortgage loans made to individuals. For
example, an entity, as opposed to an individual,
may be more inclined to seek legal protection from
its creditors, such as the trust fund, under the
bankruptcy laws. Many of these entities do not have
personal assets and creditworthiness at stake,
unlike individuals involved in bankruptcies. The
mortgagor's sophistication may increase the
likelihood of protracted litigation or bankruptcy
in default situations because a sophisticated
mortgagor will be aware of its rights, against its
mortgagee and it is more likely it will have the
resources to make effective use of all of its
defenses to payment, including filing for
bankruptcy.
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BANKRUPTCY OF BORROWERS MAY Borrowers may have businesses and liabilities
ADVERSELY AFFECT PAYMENT OF unrelated to the mortgaged property which may make
MORTGAGE LOANS the borrower more likely to become insolvent or the
subject of a bankruptcy proceeding. In addition,
any borrower, as an owner of real estate, will be
subject to certain potential liabilities and risks.
We cannot assure you that a borrower will not file
for bankruptcy protection or that creditors of a
borrower, or a corporate or individual general
partner or member of a borrower, will not initiate
a bankruptcy or similar proceeding against such
borrower. If this happens, the cash flow associated
with the mortgage loan could be delayed, reduced or
eliminated.
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<PAGE>
For more information about risks of bankruptcy, you
should refer to the section in this prospectus
titled "Certain Legal Aspects of the Mortgage
Loans--Foreclosure--Bankruptcy Laws."
- --------------
LITIGATION AGAINST A From time to time, legal proceedings may be
BORROWER MAY REDUCE ITS threatened or instituted against the borrowers and
ABILITY TO MEET ANY their affiliates relating to their business. Such
MORTGAGE litigation may potentially reduce any borrower's
ability to meet its obligations under the related
mortgage loan and, thus, reduce the trust fund's
cash flow therefrom
- --------------
CONCENTRATION OF MORTGAGE In general, a mortgage pool composed of loans
LOANS AND BORROWERS having larger average balances and a smaller number
DECREASES DIVERSIFICATION of loans may be subject to losses that are more
AND MAY INCREASE THE RISK severe than if the aggregate balance of the
OF YOUR INVESTMENT mortgage loans in the pool was more evenly
distributed. In all cases, you should carefully
consider all aspects of any mortgage loan
representing a significant percentage of the
initial pool balance to ensure that no such loan is
subject to risks unacceptable to you. Additionally,
a mortgage pool with a high concentration of
mortgage loans to the same borrower or related
borrowers is subject to the potential risk that a
borrower undergoing financial difficulties might
divert its resources or undertake remedial actions
(such as a bankruptcy) in order to alleviate such
difficulties. If this occurs, it could adversely
effect payments on the mortgage loans or the value
of the mortgage properties and therefore your
investment.
For more information concerning the mortgage pool
and the exposure to concentration risks, you should
refer to the section in the accompanying prospectus
supplement titled "Description of the Mortgage
Pool--Certain Characteristics of the Mortgage
Pool--Concentration of Mortgage Loans and
Borrowers."
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NON-RECOURSE LOANS LIMIT The majority of the mortgage loans are non-recourse
REMEDIES FOLLOWING BORROWER loans. Under these non-recourse loans, if a
DEFAULT borrower defaults, the ability of the trust fund to
recover amounts due generally may be had only
against the specific mortgaged property securing
the mortgage loan and any other assets (if any) as
may have been pledged to secure the mortgage loan.
As a result, the payment of each non-recourse
mortgage loan depends primarily upon the
sufficiency of the net operating income from the
related mortgaged property and, at maturity, upon
the market value of that mortgaged property.
For a more detailed description of the mortgage
pool, you should refer to the accompanying
prospectus supplement, including the section titled
"Description of the Mortgage Pool--General."
In those cases where recourse against the borrower
is permitted by the loan documents, the ability to
collect from the borrower is dependent upon the
creditworthiness, solvency and other factors
specific to the borrower and generally are not
within the control of any of the mortgage loan
sellers, the transferor, the depositor, the master
servicer, the special servicer, the trustee or any
of their affiliates. Therefore, even if there is
recourse, we cannot assure you that significant
amounts will be realized in respect of such
recourse in the event of a default or any mortgage
loan.
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<PAGE>
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FORECLOSURE OF ANY If the trust fund acquires a mortgaged property in
MORTGAGED PROPERTY MAY a foreclosure or deed-in-lieu of foreclosure, the
SUBJECT THE TRUST FUND TO trust fund might become subject to federal (and
CERTAIN TAXES possibly state or local) tax, at the highest
marginal corporate rate (currently 35%), on certain
of its net income from the operation and management
of that mortgaged property. As a consequence, the
net proceeds available for distribution to
certificateholders would be reduced.
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COURTS MAY REFUSE TO The mortgage loans will generally contain
ENFORCE DUE-ON-SALE, "due-on-sale" and "due-on-encumbrance" clauses.
DUE-ON-ENCUMBRANCE AND These clauses permit the mortgagee to accelerate
DEBT-ACCELERATION CLAUSES, the maturity of the mortgage loan if the related
ADVERSELY AFFECTING borrower sells or otherwise transfers or encumbers
EXERCISE OF REMEDIES UPON the related mortgaged property in violation of the
DEFAULTED MORTGAGE LOANS mortgage. The mortgage loans will also generally
include a debt-acceleration clause. A
debt-acceleration clause permits the lender to
accelerate the debt upon specified monetary or
non-monetary defaults of the borrower.
The courts of a state, however, may refuse to
permit the foreclosure or other sale of a mortgaged
property or refuse to permit the acceleration of
the indebtedness if the breach of one of these
clauses is immaterial or does not materially
adversely affect the mortgagee's security, or if
enforcement of the clause would be inequitable,
unjust, or unconscionable.
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LIMITATIONS ON THE Arrangements by which certain of the mortgage loans
ENFORCEABILITY OF are cross-collateralized and cross-defaulted with
CROSS-COLLATERALIZATION one or more related mortgage loans could be
ARRANGEMENTS MAY HAVE AN challenged as fraudulent conveyances by the
ADVERSE EFFECT ON RECOURSE creditors or the bankruptcy estate of any of the
IN THE EVENT OF A DEFAULT related borrowers. Under federal and most state
ON A CROSS-COLLATERALIZATION fraudulent conveyance statutes, the granting of a
MORTGAGE LOAN mortgage lien by a person may be voided if a court
were to determine that:
(1) the borrower did not receive fair
consideration or reasonably equivalent value when
pledging mortgaged property for the equal benefit
of the other related borrowers, and
(2) the borrower was insolvent at the time of
granting the lien, was rendered insolvent by the
granting of the lien, was left with inadequate
capital or was not able to pay its debts as they
matured.
A lien granted by a borrower on a
cross-collateralized loan to secure the mortgage
loan of an affiliated borrower, or any payment
thereon, could potentially be avoided as a
fraudulent conveyance. If this were to occur, the
trust fund's security in the mortgage loan and
resulting cash flows therefrom may be reduced.
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TRUST FUNDS MAY NOT HAVE A The related prospectus supplement will describe
PERFECTED SECURITY INTEREST whether and to what extent the mortgage loans will
IN CERTAIN ASSIGNMENTS OF be secured by an assignment of leases and rents.
LEASES AND RENTS Under an assignment of leases and rents, the
mortgagor typically assigns its rights as landlord
under the leases on the related mortgaged property
and the related income to the mortgagee as further
security for the related mortgage loan, while
retaining a license to collect rents for so long as
there is no default. If the mortgagor defaults, the
license terminates and the mortgagee is entitled to
collect rents. These assignments are typically not
perfected as security interests until the mortgagee
takes possession of the related mortgaged property
or a receiver is appointed. Some state laws may
require that the mortgagee 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 mortgagee's ability to
collect the rents may be adversely affected.
For a more detailed description of these issues,
you should refer to the section of this prospectus
titled "Certain Legal Aspects of the Mortgage
Loans-Leases and Rents."
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<PAGE>
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THE ENVIRONMENTAL CONDITION Tenants and occupants may affect the environmental
OF MORTGAGED PROPERTIES MAY condition of a mortgaged property. Current and
SUBJECT THE TRUST FUND TO future environmental laws, ordinances or
LIABILITY UNDER FEDERAL AND regulations may impose additional compliance
STATE LAWS obligations on business operations that can be met
only by significant capital expenditures.
Adverse environmental conditions subject to the
trust fund to certain risks, including the
following:
(1) a diminution in the value of a mortgaged
property or the inability to foreclose against
such mortgaged property;
(2) inability to lease the mortgaged property to
potential tenants;
(3) the potential that the related borrower may
default on a mortgage loan due to the
borrower's inability to pay high investigation
and/or remediation costs or difficulty in
bringing its operations into compliance with
environmental laws; and
(4) liability for clean-up costs or other remedial
actions which could exceed the value of the
mortgaged property.
Under certain federal and state laws, a statutory
lien over the subject property may secure the
reimbursement of remedial costs incurred by
regulatory agencies to address environmental
violations. Such a lien over a mortgage property
would adversely affect its value and could make
foreclosure upon it following default by the
related borrower impractical. Under various
federal, state and local laws, ordinances and
regulations, the trust fund may be liable for the
costs of removal or remediation of hazardous or
toxic substances on, under, adjacent to or in such
property. Liability for the cost of any required
remediation generally is not limited under
applicable laws, and could exceed the value of the
property.
For more information on the trust fund's potential
environmental risks you should refer to the section
in this prospectus titled "Certain Legal Aspects of
the Mortgage Loans--Environmental Risks" and the
section in the accompanying prospectus supplement
titled "Description of the Mortgage Pool--Certain
Characteristics of the Mortgage Pool--Environmental
Risks."
Under certain federal and state laws, it is
possible that the trust fund may be held liable for
the costs of addressing releases or threatened
releases of hazardous substances at a mortgaged
property.
For more information on the trust fund's potential
liability for releases of hazardous substances, you
should refer to the section in this prospectus
titled "Certain Legal Aspects of the Mortgage
Loans--Environmental Risks."
Each of the mortgage loan sellers has represented
to the transferor that each of the related
mortgaged properties was subject to a Phase I
"environmental site assessment" conducted
consistently with (1) generally recognized industry
standards or (2) a similar study or an update of a
previously conducted environmental site assessment
or (3) an update based upon information contained
in an established database. Other than as described
in the section of the accompanying prospectus
supplement titled "Description of the Mortgage
Pool--Certain Characteristics of the Mortgage
Pool--Environmental Risks," the mortgage loan
sellers have informed the depositor that such
assessments, studies or updates were conducted
within 12 months prior to the cut-off date for the
related series of certificates set forth in the
accompanying prospectus supplement. The mortgage
sellers have also stated that the environmental
assessments, screen assessments, studies or updates
identified no material adverse environmental
factors anticipated to require any material
expenditure for any
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<PAGE>
mortgaged property, except for:
(1) those cases where a qualified environmental
consultant investigated such factors and
recommended no further investigations or
remediation;
(2) those cases in which an environmental
consultant recommended an operations and
maintenance plan which was obtained or an
escrow reserve established to cover the
estimated costs of obtaining such plan;
(3) those cases in which soil or groundwater
contamination was suspected or identified and
either (a) such factors were remediated or
abated prior to the closing date set forth in
one accompanying prospectus supplement, (b) a
letter was obtained from the applicable
regulatory authority stating that no further
action was required or (c) an environmental
insurance policy was obtained, a letter of
credit was provided, an escrow reserve account
was established, or an indemnity from the
responsible party was obtained to cover the
estimated costs of any required investigation,
monitoring or remediation;
(4) those cases in which an offsite property is
the location of a leaking underground storage
tank or groundwater contamination, a
responsible party has been identified under
applicable law, and either (a) such condition
is not known to have affected the mortgaged
property or (b) the responsible party has
either received a letter from the applicable
regulatory agency stating nor further action
is required, established a remediation fund,
or provided an indemnity or guaranty to the
borrower; and
(5) those cases involving small loans (with an
original principal balance of less than
$1,000,000), when the borrower has
acknowledged in the mortgage loan documents
the existence of such factor and expressly
agreed to comply with all federal, state and
local statutes or regulations respecting the
factor.
The above information regarding the absence of
material adverse environmental conditions is based
upon the environmental assessments, similar studies
or updates. The mortgage loan sellers, the
depositor, the transferor, and any of their
respective affiliates have not independently
verified this information.
The pooling and servicing agreement requires that
the special servicer obtain an environmental site
assessment of a mortgaged property prior to either
acquiring title on behalf of the trust fund or
assuming the property's operations. The requirement
may effectively delay foreclosure until a
satisfactory environmental site assessment is
obtained or until any required remedial action is
taken. However, this requirement will also decrease
the likelihood that the trust fund will become
liable under any environmental law. Any
environmental site assessment could potentially
fail to reveal the factors that could result in the
trust fund becoming liable under any environmental
law. In addition the pooling and servicing
agreement's requirements may not effectively
insulate the trust fund from potential liability
under environmental laws.
For more information on environmental site
assessments, you should refer to the section in
this prospectus titled "Certain Legal Aspects of
the Mortgage Loans--Environmental Risks" and the
section in the accompanying prospectus supplement
titled "The Pooling and Servicing
Agreement--Realization Upon Mortgage
Loans--Standards for Conduct Generally in Effecting
Foreclosure or the Sale of Defaulted Loans."
JUNIOR MORTGAGE LOANS Certain of the mortgage loans may be junior
mortgage loans. The primary risk to holders of
mortgage loans secured by junior liens is the
possibility that a foreclosure of a related senior
lien would extinguish the junior lien and that
adequate funds will not be received in connection
with such foreclosure to pay the debt held by the
holder of such junior mortgage loan after
satisfaction of all related senior liens.
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<PAGE>
For more detailed information on the risks to
holder of mortgage loans secured by junior liens,
you should refer to the sections in this prospectus
titled "Certain Legal Aspects Of The Mortgage
Loans--Junior Mortgages; Rights of Senior
Mortgagees or Beneficiaries" and "--Foreclosure."
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THE INTERESTS OF THE MASTER The master servicer and/or special servicer may
SERVICER OR THE SPECIAL purchase and own certificates, including
SERVICER MAY CONFLICT WITH subordinate certificates. Under such circumstances,
THOSE OF THE TRUST FUND it is possible that the interests of the master
REGARDING THE MASTER servicer or special servicer, as a holder of the
SERVICER OR SPECIAL certificates of any class, may differ from those of
SERVICER'S PURCHASE OF the holders of certificates of any other class. The
CERTIFICATES AND SERVICING master servicer and special servicer may continue
OF NON-TRUST FUND LOANS to service existing mortgage loans and new mortgage
loans for third parties, including portfolios of
mortgage loans similar to the mortgage loans. 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. To the extent that overlap exists, the
interests of the master servicer, the special
servicer and their respective affiliates and their
other clients may differ from, and compete with,
the interests of the trust fund. The master
servicer and the special servicer are required,
however, to service the mortgage loans in
accordance with the servicing standard contained in
the pooling and servicing agreements.
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ERISA CONSIDERATIONS Generally, Title I of ERISA and certain sections of
the Tax Code apply to investments made by employee
benefit plans and transactions involving the assets
of such plans. Due to the complexity of regulations
that govern such plans, prospective benefit plan
investors that are subject to ERISA or the Tax Code
are urged to consult their own counsel regarding
consequences under ERISA of acquisition, ownership
and disposition of the certificates of any series.
For more detailed information, you should refer to
the section in this prospectus titled "ERISA
Considerations."
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MATERIAL FEDERAL TAX Holders of residual certificates will be required
CONSIDERATIONS REGARDING to report on their federal income tax returns as
RESIDUAL CERTIFICATES 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 the section of this prospectus titled
"Material Federal Income Tax Consequences-Federal
Income Tax Consequences for REMIC Certificates." It
is possible that holders of residual certificates
may have taxable income and tax liabilities arising
from their investment in excess of the cash
received during a taxable year. The requirement
that holders of residual certificates report their
pro rata share of the taxable income of the REMIC
will continue until the certificate balances of all
classes of certificates of the related series have
been reduced to zero, even if holders of residual
certificates have received full payment of their
stated interest and principal. A portion (or, in
certain circumstances, all) of a
certificateholder's share of the REMIC taxable
income may be treated as "excess inclusion" income
which (1) will generally not be subject to offset
by losses from other activities, (2) will be
treated as unrelated business taxable income for a
tax-exempt holder, and (3) will not qualify for
exemption from withholding tax for a foreign
holder. Individual holders of residual certificates
may be limited in their ability to deduct servicing
fees and other expenses of the REMIC. In addition,
residual certificates are subject to certain
restrictions on transfer. Because of the special
tax treatment of residual certificates, the taxable
income arising in a given year on a Residual
Certificate will not be equal to the taxable income
associated with a corporate bond or stripped
instrument having similar cash flow characteristics
and pre-tax yield.
==============
RISK OF TAXABLE INCOME IN A holder of a certificate in a Class of Subordinate
EXCESS OF DISTRIBUTIONS Certificates could be allocated taxable income
RECEIVED attributable to accruals of interest and original
issue discount in excess of cash distributed to
such holder if mortgage loans were in default
giving rise to delays in distributions.
For more detailed information, you should refer to
the section in this prospectus titled "Material
Federal Income Tax Consequences-Taxation of Regular
Interests-Treatment of Subordinate Certificates."
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THE DEPOSITOR
Prudential Securities Financing Corp. (the "Depositor") will deposit
the Mortgage Loans into the Trust Fund. The Depositor was incorporated in the
State of Delaware on August 26, 1988 as a wholly owned, limited purpose finance
subsidiary of [Prudential Securities Group Inc.]. The principal executive
offices of the Depositor are located at One New York Plaza, New York, New York
10292, attention David Rodgers, (212) 214-1000.
The Depositor will have no servicing obligations or responsibilities
with respect to any series of Certificates, Mortgage Pool or Trust Fund. The
Depositor does not have, and does not expect to have, any significant assets.
The Depositor was organized for the purposes of establishing trusts,
selling interests in the trusts and acquiring and selling mortgage assets to
those trusts. Neither the Depositor, its parent nor any of its affiliates will
insure or guarantee collections on the Mortgage Loans or distributions on the
Certificates. Unless otherwise specified in the applicable prospectus
supplement, 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 of Offered Certificates to (1) purchase the
Mortgage Loans relating to that series, (2) repay debt that was incurred to
acquire Mortgage Loans, (3) obtain credit enhancement, if any, for the series,
and (4) pay costs of structuring, issuing and underwriting the Certificates.
Certificates may be exchanged by the Depositor for Mortgage Loans if so
specified in the accompanying prospectus supplement.
DESCRIPTION OF THE CERTIFICATES
The Certificates of each series will be issued pursuant to a separate
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement" ) to be
entered into among the Depositor, the master servicer (the "Master Servicer"),
the special servicer (the "Special Servicer"), if any, and the Trustee for that
series of Certificates and any other parties described in the related 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 general provisions of the Certificates and the Pooling and Servicing
Agreement. However, the prospectus supplement for each series of Certificates
will more fully describe the Certificates and the provisions of the related
Pooling and Servicing Agreement, which may be different from the following
summaries.
At the time of issuance, the Offered Certificates of each series will
be rated "investment grade," one of the four highest categories, by a nationally
recognized statistical rating organization. Each rating organization specified
in a prospectus supplement as rating Offered Certificates is 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
Each series of Certificates 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 Pooling and Servicing Agreement for that
series. The Trust Fund for each series will primarily include, to the extent
provided in the Pooling and Servicing Agreement:
(1) the Mortgage Loans conveyed to the Trustee pursuant to the Pooling
and Servicing Agreement;
(2) all payments on or collections from the Mortgage Loans due after
the Cut-off Date;
(3) all REO property, as defined in the accompanying prospectus
supplement;
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(4) all revenue received in respect of any REO Property;
(5) all insurance policies with respect to the Mortgage Loans;
(6) all assignments of leases, rents and profits and security
agreements;
(7) all indemnities or guaranties given as additional security for the
Mortgage Loans;
(8) the Trustee's interest in all reserve or escrow accounts
established pursuant to any of the Mortgage Loan documents (each,
a "Reserve Account");
(9) the Collection Account;
(10) the Distribution Account and the REO Account;
(11) all environmental indemnities relating to the Mortgaged
Properties;
(12) all rights and remedies under the Mortgage Loan Purchase and Sale
Agreement;
(13) all proceeds of any of the foregoing (excluding interest earned on
deposits in any Reserve Account, to the extent that interest
belongs to the related mortgagor); and
(14) all other assets or rights described in the accompanying
prospectus supplement.
In addition, the Trust Fund for a series may include private mortgage
pass-through certificates, certificates issued or guaranteed by the Federal Home
Loan Mortgage Corporation ("FHLMC"), Fannie Mae or the Governmental National
Mortgage Association ("GNMA") or mortgage pass-through certificates previously
created by the Depositor, as well as various forms of Credit Enhancement. See
"Credit Enhancement." Other assets contained in a Trust Fund will be described
more fully in the related prospectus supplement.
If so specified in the related prospectus supplement, Certificates of a
given series may be issued in several classes. The Classes may:
(1) pay interest at different rates,
(2) represent different allocations of the right to receive principal
and interest payments, such as subordination,
(3) be structured to receive principal payments in sequence by class
(each class in a group of sequential pay classes would be entitled to be paid in
full before the next class in the group is entitled to receive any principal
payments), or
(4) 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 that series or may be offered in a separate
offering document.
Each class of Certificates will be issued in the minimum denominations
specified in the related prospectus supplement.
The prospectus supplement for each series will contain a description of
their characteristics and specific risk factors, including, as applicable, (1)
mortgage principal prepayment effects on the weighted average lives of classes;
(2) 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 (3) the degree to which an investor's yield is
sensitive to principal prepayments.
The Offered Certificates of each series will be freely transferable and
exchangeable at the office specified in the related Pooling and Servicing
Agreement and prospectus supplement. Certain classes of Certificates, however,
may be subject to transfer restrictions described in the related prospectus
supplement.
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DISTRIBUTIONS ON CERTIFICATES
The Trustee (or a paying agent that may be identified in the related
prospectus supplement) will distribute to the registered holders of the
Certificates (the "Certificateholders") amounts described in the related
prospectus supplement on the day (the "Distribution Date") specified in the
related prospectus supplement. These distributions will begin on the date
specified in the related prospectus supplement following the establishment of
the related Trust Fund. In general, the distributions will include previously
undistributed payments of principal (including principal prepayments, if any)
and interest on the Mortgage Loans received by the Master Servicer or the
Special Servicer, after a date specified in the related prospectus supplement
(the "Cut-off Date") and prior to the date specified in the related prospectus
supplement for each Distribution Date. The Trustee shall mail checks for such
distributions to the address of the person entitled to the payment as it appears
on the certificate register maintained by the Trustee (or wire transfer such
funds if so specified in the related 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.
ACCOUNTS
The Master Servicer will establish and maintain an account (the
"Collection Account") in the name of the Trustee for the benefit of the
Certificateholders for each Series of Certificates. The Master Servicer
generally will be required to deposit into the Collection Account all amounts
received on or in respect of the Mortgage Loans. The Master Servicer will be
entitled to withdraw amounts from the Collection Account to, among other things:
(1) transfer certain amounts for the related Distribution Date into the
Distribution Account;
(2) pay Property Protection Expenses, taxes, assessments and insurance
premiums and certain third-party expenses in accordance with the Pooling and
Servicing Agreement;
(3) pay accrued and unpaid servicing fees and other servicing
compensation to the Master Servicer and the Special Servicer, if any; and
(4) reimburse the Master Servicer, the Special Servicer, the Trustee
and the Depositor for certain expenses and indemnify the Depositor, the Master
Servicer and the Special Servicer, as described in the Pooling and Servicing
Agreement.
"Property Protection Expenses" are certain costs and expenses incurred
in connection with defaulted Mortgage Loans, the acquisition of title to, or
management of, REO Property, or the sale of defaulted Mortgage Loans or REO
Properties. The applicable prospectus supplement may provide for additional
circumstances in which the Master Servicer will be entitled to make withdrawals
from the Collection Account.
The Trustee will establish an account (the "Distribution Account") in
the name of the Trustee for the benefit of the Certificateholders for each
series of Certificates. The Master Servicer generally will be required to
transfer to the Distribution Account amounts held in the Collection Account to
make distributions to Certificateholders for a given Distribution Date. On each
Distribution Date, the Trustee will use amounts on deposit in the Distribution
Account to distribute interest and principal to the Certificateholders in the
manner described in the related prospectus supplement.
The amount in the Collection Account or the Distribution Account at any
time may be invested in Permitted Investments that are payable on demand or
mature, or are subject to withdrawal or redemption, on or before the business
day before the next Master Servicer Remittance Date, in the case of the
Collection Account, or the business day before the next Distribution Date, in
the case of the Distribution Account. The Master Servicer will be required to
remit to the Distribution Account on or before the business day before the
related Distribution Date (the "Master Servicer Remittance Date") amounts on
deposit in the Collection Account that are required for distribution to
Certificateholders. The income from the investment of funds in the Collection
Account and the Distribution Account in Permitted Investments will be paid to
the Master Servicer as additional servicing compensation, and the Master
Servicer will bear the risk of loss of funds in the Collection Account and the
Distribution Account resulting from such investments. The Master Servicer will
be required to deposit the amount of any such loss in the Collection Account or
the Distribution Account, as the case may be, promptly as realized.
The Master Servicer or the Special Servicer generally will establish
and maintain an account (the "REO Account") to be used in connection with REO
Properties and, if specified in the related prospectus supplement, certain other
Mortgaged Properties.
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To the extent set forth in the Pooling and Servicing Agreement, certain
withdrawals from the REO Account will be made to, among other things, (1) make
remittances to the Collection Account as required by the Pooling and Servicing
Agreement; (2) 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 Pooling and Servicing Agreement; and (3) provide for the
reimbursement of certain expenses in respect of the REO Properties and such
Mortgaged Properties.
The amount in the REO Account at any time may be invested in Permitted
Investments that are payable on demand or mature, or are subject to withdrawal
or redemption, on or before the business day before the 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 will be paid to the Master Servicer, or the Special
Servicer, if applicable, as additional servicing compensation, and the Master
Servicer or the Special Servicer, as applicable, will bear the risk of loss of
funds in the REO Account resulting from such investments. The Master Servicer or
the Special Servicer, as applicable, will be required to deposit the amount of
any such loss in the REO Account promptly as realized.
"Permitted Investments" will generally consist of one or more of the
following, unless the Rating Agencies rating Certificates of a series require
other or additional investments:
(1) 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 those obligations are
backed by the full faith and credit of the United States of
America;
(2) direct obligations of the FHLMC (debt obligations only), Fannie
Mae (debt obligations only), the Federal Farm Credit System
(consolidated system-wide bonds and notes only), the Federal Home
Loan Banks (consolidated debt obligations only), the Student Loan
Marketing Association (debt obligations only), the Financing Corp.
(consolidated debt obligations only) and the Resolution Funding
Corp. (debt obligations only);
(3) federal funds time deposits in, or certificates of deposit of, or
bankers' acceptances or repurchase obligations issued by, any bank
or trust company, savings and loan association or savings bank,
depositing institution or trust company having the highest
short-term debt obligation from Standard & Poor's Rating Services,
a division of the McGraw-Hill Companies, Inc. ("S&P") 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 rating the Certificates, provided, in each case, the
maturity is not more than 365 days;
(4) commercial paper having a maturity of 365 days or less (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 and
demand notes that constitute vehicles for investment in commercial
paper) that is rated by each Rating Agency rating the Certificates
in its highest short-term unsecured rating category;
(5) units of taxable money market funds or mutual funds that seek to
maintain a constant asset value and have been rated by each Rating
Agency rating the Certificates as Permitted Investments;
(6) 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
rating the Certificates as a permitted investment of funds backing
securities having ratings equivalent to each Rating Agency's
highest initial rating of the Certificates; and
(7) such other obligations as are acceptable as Permitted Investments
to each Rating Agency rating the Certificates; provided, however,
that (a) if S&P is rating the Certificates, none of the
obligations or securities listed above may have an "r" highlighter
affixed to its rating if rated by S&P; (b) except for units of
money market funds pursuant to clause (5) above, each obligation
or security will have a fixed dollar amount of principal due at
maturity which cannot vary or change; (c) except for units of
money market funds pursuant to clause (5) above, if any obligation
or security provides for a variable rate of interest, interest
will be tied to a single interest rate index plus a single fixed
spread (if any) and move proportionately with that index; and (d)
if any of the obligations or securities listed in paragraphs (3)
-(6) above are not rated by each Rating Agency rating the
Certificates, such investment will nonetheless qualify as a
Permitted Investment if it is rated by one of the Rating Agencies
rating the Certificates and
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one other nationally recognized statistical rating organization;
and provided, further, that such instrument continues to qualify
as a "cash flow investment" pursuant to Tax Code Section
860G(a)(6) earning a passive return in the nature of interest and
that no instrument or security will be a Permitted Investment if
(a) such instrument or security evidences a right to receive only
interest payments or (b) the right to receive principal and
interest payments derived from the underlying investment provides
a yield to maturity in excess of 120% of the yield to maturity at
par of the underlying investment as of the date of its
acquisition.
AMENDMENT OF POOLING AND SERVICING AGREEMENT
Generally, the Pooling and Servicing Agreement for each series may be
amended from time to time by the parties thereto without the consent of any of
the Certificateholders to:
(1) cure any ambiguity,
(2) correct or supplement any provisions that may be inconsistent with
any other provisions,
(3) amend any provision to the extent necessary or desirable to
maintain the rating or ratings assigned to each of the classes of
Certificates by each Rating Agency, or
(4) address other matters or questions arising under the Pooling and
Servicing Agreement that will not (a) be inconsistent with the
provisions of the Pooling and Servicing Agreement, (b) result in
the downgrading, withdrawal or qualification of the rating or
ratings then assigned to any outstanding class of Certificates and
(c) adversely affect in any material respect the interests of any
Certificateholder, as evidenced by an opinion of counsel.
Each Pooling and Servicing Agreement may be amended from time to time
by the parties thereto with the consent of the holders of each of the classes of
Certificates representing at least a percentage specified in the related Pooling
and Servicing Agreement of each class of Certificates affected by the amendment.
However, no such amendment shall:
(1) reduce in any manner the amount of, or delay the timing of,
payments received on Mortgage Loans that are required to be
distributed on any Certificate, without the consent of each
affected Certificateholder;
(2) change the percentage of Certificates required to consent to any
action or inaction under the Pooling and Servicing Agreement,
without the consent of the holders of all outstanding
Certificates; or
(3) alter the obligations of the Master Servicer or the Trustee to
make an advance, without the consent of the holders of all
Certificates representing all of the Voting Rights of the class or
classes affected thereby.
"Voting Rights" means the consent or approval of the holders of a
specified percentage of the aggregate Certificate Balance of all outstanding
Certificates of a series or any similar means of allocating decision-making
under the related Pooling and Servicing Agreement specified in the related
prospectus supplement.
Further, the Pooling and Servicing Agreement for each series may
provide that the parties thereto, without the consent of the Certificateholders,
may amend the Pooling and Servicing Agreement to modify, eliminate or add to any
of its provisions to the extent necessary or helpful to maintain the
qualification of any REMIC related to the series or to prevent the imposition of
any additional material state or local taxes, while any of the Certificates are
outstanding. However, such action, as evidenced by an opinion of counsel, must
not adversely affect in any material respect the interest of any
Certificateholder.
The related prospectus supplement will specify the method for
allocating Voting Rights among holders of Certificates of a class. Any
Certificate beneficially owned by the Depositor, the Master Servicer, the
Special Servicer, any mortgagor, the Trustee or any of their respective
affiliates will be deemed not to be outstanding. However, Certificates
beneficially owned by the Master Servicer, the Special Servicer, or any of their
affiliates will be deemed to be outstanding in connection with any required
consent to an amendment of the Pooling and Servicing Agreement that relates to
an action that would materially adversely affect in any material respect the
interests of the Certificateholders of any class while the Master Servicer, the
Special Servicer, or any such affiliate owns not less than a percentage of such
class specified in the related Pooling and Servicing Agreement.
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The Pooling and Servicing Agreement relating to each series may provide
that no amendment to such Pooling and Servicing Agreement will be made unless
there has been delivered in accordance with such Pooling and Servicing Agreement
an opinion of counsel to the effect that such amendment will not cause that
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 Pooling and Servicing
Agreement required by the Rating Agencies rating Certificates of such series.
TERMINATION OF POOLING AND SERVICING AGREEMENT
The obligations of the parties to the Pooling and Servicing Agreement
for each series will terminate upon:
(1) the purchase of all of the assets of the related Trust Fund, as
described in the related prospectus supplement;
(2) the later of (a) the distribution to Certificateholders of that
series of the final payment on 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 Pooling and
Servicing Agreement;
(3) 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 Pooling and Servicing
Agreement; or
(4) the mutual consent of the parties and all Certificateholders.
For each series, the Trustee will give or cause to be given written
notice of termination of the Pooling and Servicing Agreement to each
Certificateholder and the final distribution under the Pooling and Servicing
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 a
paying agent identified in the applicable prospectus supplement) will forward to
each Certificateholder a statement setting forth information relating to the
distribution as specified in the Pooling and Servicing 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 Pooling and Servicing Agreement for each series and
the Trustee will be identified, and its obligations under that Pooling and
Servicing Agreement will be described, in the applicable prospectus supplement.
The Rating Agencies rating Certificates of a series may require the appointment
of a Fiscal Agent to guarantee certain obligations of the Trustee who would be a
party to the Pooling and Servicing Agreement. In such event, the Fiscal Agent
will be identified, and its obligations under the Pooling and Servicing
Agreement will be described, in the applicable prospectus supplement. See
"Servicing of the Mortgage Loan-Certain Matters with Respect to the Master
Servicer, the Special Servicer, the Trustee and the Depositor."
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 (each, a
"Mortgage") on, or installment contracts ("Installment Contracts") for the sale
of, fee simple or leasehold interests in properties improved by office
buildings, health-care related properties, congregate care facilities, hotels
and motels, industrial properties, warehouse, mini-warehouse, and self-storage
facilities, mobile home parks, multifamily properties, cooperative apartment
buildings, nursing homes, office/retail properties, anchored retail properties,
single-tenant retail properties, unanchored retail properties and other
commercial real estate properties, multifamily residential properties and/or
mixed residential commercial properties (each, a "Mortgaged Property"). A
Mortgage Pool may also include participation interests in such types of mortgage
loans, private-label mortgage pass-through certificates, certificates issued or
guaranteed by FHLMC, Fannie Mae or
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GNMA, mortgage pass-through certificates, or collateralized mortgage
obligations. Each such mortgage loan, Installment Contract, participation
interest, certificate, or collateralized mortgage obligation 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 mortgagors; and
(7) any other types of Mortgage Loans described in the applicable
prospectus supplement.
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
on the related promissory note, bond, mortgage consolidation agreement,
installment contract or other similar instrument (each, a "Note") assigns its
right, title and interest as landlord under each lease and the income derived
therefrom to the related mortgagee, while retaining a license to collect the
rents for so long as there is no default. If the obligor defaults, the license
terminates and the related mortgagee is entitled to collect the rents from
tenants to be applied to the monetary obligations of the obligor. State law may
limit or restrict the enforcement of the assignment of leases and rents by a
mortgagee until the mortgagee takes possession of the related mortgaged property
and/or a receiver is appointed. For more detailed information, you should refer
to the section in this prospectus titled "Certain Legal Aspects Of The Mortgage
Loans-Leases and Rents."
If so specified in the accompanying prospectus supplement, a Trust Fund
may include a number of Mortgage Loans with a single obligor or related
obligors, however, the principal balance of mortgage loans to a single obligor
or group of related obligors will not exceed 45% of the initial principal amount
of the Certificates for a series. If the Mortgage Pool securing Certificates for
any series includes a Mortgage Loan or mortgage-backed security or a group of
Mortgage Loans or mortgage-backed securities of a single obligor or group of
related obligors representing 10% or more, but less than 45%, of the principal
amount of such Certificates, the prospectus supplement will contain information,
including financial information, regarding the credit quality of the obligors.
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.
The prospectus supplement relating to each series will specify (1) the
Mortgage Loan Seller or Mortgage Loan Sellers relating to the Mortgage Loans,
which may include Real Estate Investment Trusts ("REITs"), commercial banks,
savings and loan associations, other financial institutions, mortgage banks,
credit companies, insurance companies, real estate developers or other HUD
approved lenders, and (2) 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:
(1) the aggregate principal balance of the Mortgage Loans;
(2) the types of properties securing the Mortgage Loans and the
aggregate principal balance of the Mortgage Loans secured by each
type of property;
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(3) the interest rate or range of interest rates of the Mortgage
Loans;
(4) the origination dates and the original and, with respect to
seasoned Mortgage Loans, remaining terms to stated maturity of the
Mortgage Loans;
(5) 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;
(6) the geographic distribution of the Mortgaged Properties underlying
the Mortgage Loans;
(7) the minimum interest rates, margins, adjustment caps, adjustment
frequencies, indices and other similar information applicable to
adjustable rate Mortgage Loans;
(8) the debt service coverage ratios relating to the Mortgage Loans;
and
(9) payment delinquencies, if any, relating to the Mortgage Loans.
The applicable prospectus supplement will also specify any materially inadequate
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 SEC 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 assign to the Trustee the Mortgage Loans, together with all
scheduled payments of interest and principal due after the Cut-off Date
(regardless whether received prior to the Cut-off Date) and all payments of
interest and principal received by the Depositor or the Master Servicer on or
with respect to the Mortgage Loans after the Cut-off Date. The Trustee 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 Pooling and Servicing Agreement for the related series (the "Mortgage Loan
Schedule"). The Mortgage Loan Schedule will contain information on each Mortgage
Loan, including the outstanding principal balance as of the close of business on
the Cut-off Date, the interest rate, the scheduled monthly (or other periodic)
payment of principal and interest as of the Cut-off Date, the maturity date of
each Note and the address of the property securing the Note.
In addition, the Depositor will, as to each Mortgage Loan, deliver to
the Trustee:
(1) the Note, endorsed to the order of the Trustee without recourse;
(2) the Mortgage and an executed assignment thereof in favor of the
Trustee or otherwise as required by the Pooling and Servicing
Agreement;
(3) any assumption, modification or substitution agreements relating
to the Mortgage Loan;
(4) a mortgagee's title insurance policy (or owner's policy in the
case of an Installment Contract), together with endorsements, or
an attorney's opinion of title issued as of the date of
origination of the Mortgage Loan; and
(5) other relevant documents described in the related prospectus
supplement.
If the security losses are not covered by the methods of Credit Enhancement or
the insurance policies described in this prospectus and/or in the related
prospectus supplement, the ability of the Trust Fund to pay principal of and
interest on the Certificates may be
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adversely affected. Even if credit support covers all losses resulting from
defaults and foreclosure, the effect of defaults and foreclosures may be to
increase prepayments on the Mortgage Loans, shortening the weighted average life
and affecting the yield to maturity.
REPRESENTATIONS AND WARRANTIES
The seller of a Mortgage Loan to the Depositor (the "Mortgage Loan
Seller") will make representations and warranties in the Mortgage Loans sold by
the Mortgage Loan Seller to the Depositor. The Mortgage Loan Seller may be an
affiliate of the Depositor. The representations and warranties will generally
include:
(1) 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
on the related Mortgaged Property 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 Mortgage Loan Seller,
(2) that the Mortgage Loan Seller had good and marketable (or
indefeasible, in the case of real property located in Texas) title
to each such Mortgage Loan,
(3) that each mortgage constituted a valid first lien on the Mortgaged
Property (subject only to permissible title insurance exceptions);
(4) that there were no delinquent tax or assessment liens against the
Mortgaged Property; and
(5) that all required payments were current for each Mortgage Loan.
Each prospectus supplement will specify the representations and warranties being
made by the Mortgage Loan Seller.
All of the representations and warranties of a Mortgage Loan Seller
about a Mortgage Loan generally will be made as of the date the Mortgage Loan
Seller sold the Mortgage Loan to the Depositor. The related prospectus
supplement will indicate if a different date is applicable. A substantial period
of time may have elapsed between that 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 the Mortgage Loan Seller do not
address events that may occur following the sale of a Mortgage Loan by the
Mortgage Loan Seller, the repurchase obligation of the Mortgage Loan Seller
described below will not arise if, on or after the date of the sale of a
Mortgage Loan by the Mortgage Loan Seller to the Depositor, 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 its attention that would cause it to
believe that the representations and warranties of the Mortgage Loan Seller
about the Mortgage Loan will not be accurate and complete in all material
respects as of the related Cut-off Date. If so specified in the related
prospectus supplement, the Depositor will make certain representations and
warranties about a Mortgage Loan for the benefit of Certificateholders of a
series as of the date of sale of that Mortgage Loan to the Depositor.
Upon the discovery of the breach of any representation or warranty made
by the Mortgage Loan Seller about a Mortgage Loan that materially and adversely
affects the interests of the Certificateholders of the related series, the
Mortgage Loan Seller generally will be obligated to repurchase such Mortgage
Loan. The purchase price for such Mortgage Loan will generally equal 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, at a price that avoids a tax on a prohibited transaction, as
described in Section 860F(a) of the Tax Code, in each case together with accrued
interest at the interest rate for such Mortgage Loan to the first day of the
month following the repurchase and the amount of any unreimbursed advances made
by the Master Servicer in respect of the Mortgage Loan, together with interest
on such advanced amount at the reimbursement rate. The Master Servicer must
enforce the repurchase obligation of the Mortgage Loan 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 the Mortgage Loan. This
repurchase obligation will generally constitute the sole remedy available to the
Certificateholders of a series for a breach of a representation or warranty by a
Mortgage Loan Seller, and the Depositor and the Master Servicer will have no
liability to the Trust Fund for any such breach. The applicable prospectus
supplement will indicate whether any additional remedies will be available to
the Certificateholders. No assurance can be given that a Mortgage Loan Seller
will carry out its repurchase obligation with respect to the Mortgage Loans.
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If specified in the related prospectus supplement, the Mortgage Loan
Seller may be permitted to substitute alternate Mortgage Loans upon the
occurrence of the following:
(1) Mortgage Loans initially included in a Trust Fund do not conform
to their description in the related prospectus supplement; and
(2) a breach of a representation or warranty by the Mortgage Loan
Seller that materially and adversely affects the interests of the
Certificateholders is discovered or a document in the related
Mortgage Loan File is materially defective.
The Mortgage Loan Seller may substitute alternate Mortgage Loans by delivering
replacement Mortgage Loans to the Trustee within a specified period of time
after the issuance of that series of Certificates. The related prospectus
supplement will describe any required characteristics of substituted Mortgage
Loans.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The servicer of the Mortgage Loans (the "Master Servicer") will be
specified in the applicable prospectus supplement and may be an affiliate of the
Depositor. Each prospectus supplement will provide information about the Master
Servicer. The Master Servicer will be responsible for servicing the Mortgage
Loans pursuant to the Pooling and Servicing Agreement for the related series. To
the extent described in the related prospectus supplement, one or more Special
Servicers may be a party to the Pooling and Servicing Agreement or may be
appointed by holders of certain classes of Regular Certificates or by another
specified party. Information about the Special Servicer will be set forth in the
applicable prospectus supplement.
A Special Servicer for any series of Certificates may be an affiliate
of the Depositor or the Master Servicer and may hold, or be affiliated with the
holder of, Subordinate Certificates of that series. A Special Servicer may be
entitled to any of the rights and subject to any of the obligations of a Master
Servicer. In general, a Special Servicer's duties will relate to defaulted
Mortgage Loans or those Mortgage Loans that otherwise require special servicing
("Specially Serviced Mortgage Loans"), including instituting foreclosures,
negotiating work-outs and asset management activities with respect to any REO
Property. The related prospectus supplement will describe the rights,
obligations and compensation of any Special Servicer for a particular series of
Certificates. The Master Servicer or Special Servicer generally may subcontract
the servicing of all or a portion of the Mortgage Loans to one or more
sub-servicers provided certain conditions are met. A sub-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 and the Special Servicer will each use reasonable
efforts to collect all payments under the Mortgage Loans and will, consistent
with the related Pooling and Servicing Agreement, follow collection procedures
as it deems necessary or desirable. Unless otherwise specified in the related
prospectus supplement, the Master Servicer or the Special Servicer, if
applicable, may, in its discretion, waive any late payment charge or penalty
fees in connection with a late payment of a Mortgage Loan and, if so specified
in the related prospectus supplement, may extend the due dates for payments due
on a Mortgage Loan.
The Master Servicer will establish and maintain an escrow account (the
"Escrow Account") in which the Master Servicer must deposit amounts received
from each mortgagor, if required by the terms of the related Mortgage Loan
documents, for the payment of taxes, assessments, certain mortgage and hazard
insurance premiums and other comparable items ("Escrow Payments"). The Special
Servicer must remit amounts received for such purposes on Mortgage Loans
serviced by it to the Master Servicer for deposit into the Escrow Account, and
will be entitled to direct the Master Servicer to make withdrawals from the
Escrow Account if required for servicing of such Mortgage Loans. Withdrawals
from the Escrow Account generally may be made to:
(1) effect timely payment of taxes, assessments, mortgage and hazard
insurance premiums and other comparable items;
(2) transfer funds to the Collection Account to reimburse the Master
Servicer or the Trustee, as applicable, for any advance with
interest thereon relating to Escrow Payments;
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(3) restore or repair the Mortgaged Properties;
(4) clear and terminate such account;
(5) pay interest and other amounts to mortgagors on balances in the
Escrow Account, if required by the terms of the related Mortgage
Loan documents or by applicable law; and
(6) remove amounts not required to be deposited therein.
The related prospectus supplement may provide for other permitted withdrawals
from the Escrow 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 mortgagors by the terms of the related Mortgage Loan documents or
by applicable law. The Master Servicer will be responsible for the
administration of the Escrow Account.
INSURANCE
The Master Servicer will use its reasonable efforts to require each
mortgagor to maintain insurance in accordance with the related Mortgage Loan
documents, which generally will include a standard fire and hazard insurance
policy with extended coverage. To the extent required by the related Mortgage
Loan, the coverage of each standard hazard insurance policy will be in an amount
that is at least equal to the lesser of:
(1) the full replacement cost of the improvements and equipment
securing the Mortgage Loan; or
(2) the outstanding principal balance owing on the Mortgage Loan or
the amount necessary to prevent any reduction in the policy by
reason of the application of co-insurance and to prevent the
Trustee under the Mortgage Loan from being deemed to be a
co-insurer, in each case with a replacement cost rider.
The Master Servicer will also use reasonable efforts to require each mortgagor
to maintain the following insurance:
(1) insurance providing coverage against 12 months of rent
interruptions; and
(2) any other insurance required by the related Mortgage Loan
documents.
Subject to the requirements for modification, waiver or amendment of a Mortgage
Loan (See "Modifications, Waivers and Amendments"), the Master Servicer may in
its reasonable discretion consistent with the servicing standard set forth in
the related Pooling and Servicing Agreement waive the requirement of a Mortgage
Loan that the related mortgagor maintain earthquake insurance on the related
Mortgaged Property.
If a Mortgaged Property is located at the time of origination of the
related Mortgage Loan in a federally designated special flood hazard area, the
Master Servicer will use reasonable efforts to require the related mortgagor 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
for the Mortgage Loan. The related Pooling and Servicing Agreement will provide
that the Master Servicer will be required to maintain the foregoing insurance if
the related borrower fails to maintain this insurance to the extent available at
commercially reasonable rates and to the extent the Trustee, as mortgagee, has
an insurable interest. The cost of insurance maintained by the Master Servicer
will be advanced by the Master Servicer.
The Master Servicer or the Special Servicer will cause to be maintained
fire and hazard insurance with extended coverage on each REO Property in an
amount that is at least equal to the full replacement cost of the improvements
and equipment on that REO Property. The cost of insurance with respect to an REO
Property will be payable out of amounts on deposit in the related REO Account or
will be advanced by the Master Servicer or the Special Servicer. The Master
Servicer or the Special Servicer will maintain flood insurance providing
substantially the same coverage as described above on any REO Property that was
located in a federally designated special flood hazard area at the time the
related Mortgage Loan was originated. The Master Servicer or the Special
Servicer will maintain for each REO Property:
(1) public liability insurance;
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(2) loss of rent endorsements ;and
(3) any other insurance required in the related Mortgage Loan
documents.
Any insurance that is required to be maintained on any REO Property will only be
required to the extent available at commercially reasonable rates.
The related Pooling and Servicing Agreement will provide that the
Master Servicer or Special Servicer may satisfy its obligation to cause hazard
insurance policies to be maintained by maintaining a master force placed
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 or REO Property, if not borne by the related
borrower, will be an expense of the Trust Fund. Alternatively, the Master
Servicer or Special Servicer, if any, may satisfy its obligation by maintaining,
at its expense, a blanket policy (i.e., not a master force placed policy)
insuring against losses on the Mortgage Loans or REO Properties, as the case may
be. If such a blanket or master force placed policy contains a deductible
clause, the Master Servicer or the Special Servicer, if any, will be obligated
to deposit in the Collection Account all sums that would have been deposited but
for such clause to the extent any deductible exceeds:
(1) the deductible limitation that pertained to the related Mortgage
Loan, or
(2) in the absence of any deductible limitation, the deductible
limitation that is consistent with the servicing standard under
the related Pooling and Servicing Agreement.
In general, the standard form of fire and hazard extended coverage
insurance 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, they will not contain identical terms and conditions. Their most
significant terms, however, generally will be determined by state law and
conditions. Most standard hazard insurance 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 mudflows), nuclear reaction, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases, vandalism. The foregoing list is
merely indicative of certain kinds of uninsured risks and is not intended to be
all-inclusive. Any losses incurred with respect to Mortgage Loans due to
uninsured risks (including earthquakes, mudflows and floods) or insufficient
hazard insurance proceeds could affect distributions to the Certificateholders.
The standard hazard insurance policies covering Mortgaged Properties
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 improvements on the Mortgaged
Property to recover the full amount of any partial loss. If the insured's
coverage falls below this specified percentage, the "co-insurance" clause will
provide that the insurer's liability upon a partial loss will not exceed the
greater of (1) the actual cash value (the replacement cost less physical
depreciation) of the improvements damaged or destroyed and (2) the 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
improvements.
The prospectus supplement may describe other provisions concerning the
insurance policies required to be maintained under the related Pooling and
Servicing 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.
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FIDELITY BONDS AND ERRORS AND OMISSIONS
The Master Servicer and the Special Servicer are generally required to
obtain and maintain in effect a fidelity bond or similar form of insurance
coverage (which may provide blanket coverage) insuring against loss by fraud,
theft or other intentional misconduct of the officers and employees of the
Master Servicer and the Special Servicer. The Master Servicer and the Special
Servicer may self-insure against loss occasioned by the errors and omissions of
the officers and employees of the Master Servicer and the Special Servicer so
long as certain criteria set forth in the related Pooling and Servicing
Agreement are met.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer's principal compensation for its activities under
the Pooling and Servicing Agreement for each series will be a "Servicing Fee"
(as defined in the related prospectus supplement) with respect to each Mortgage
Loan. The exact amount and calculation of the Servicing Fee will be established
in the prospectus supplement and Pooling and Servicing Agreement for the related
series. Because 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 Master
Servicer may be entitled to receive, as additional compensation, (1) Prepayment
Premiums, late fees and certain other fees collected from borrowers and (2) all
income earned on funds deposited in the Collection Account and Distribution
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. The Master Servicer will generally pay the fees
and expenses of the Trustee. The amount and calculation of the fee for the
servicing of Specially Serviced Mortgage Loans (the "Special Servicing Fee")
will be described in the prospectus supplement and Pooling and Servicing
Agreement for the related series. In addition to the compensation described
above, the Master Servicer and the Special Servicer (or any other party
specified in the applicable prospectus supplement) may retain, or be entitled to
the reimbursement of, other amounts and expenses as described in the applicable
prospectus supplement.
ADVANCES
The applicable prospectus supplement will describe any obligations of
the Master Servicer and the Special Servicer to make any advances for delinquent
payments on Mortgage Loans, payments of taxes, assessments, insurance premiums
and Property Protection Expenses or otherwise. Any advances will be made in the
form and manner described in the prospectus supplement and Pooling and Servicing
Agreement for the related series.
MODIFICATIONS, WAIVERS AND AMENDMENTS
The Master Servicer or the Special Servicer will have the discretion to
modify, waive or amend certain of the terms of any Mortgage Loan without the
consent of the Trustee or any Certificateholder subject to certain conditions,
including the condition that any modification, waiver or amendment will not
result in the Mortgage Loan ceasing to be a "qualified mortgage" under the REMIC
Regulations.
EVIDENCE OF COMPLIANCE
A firm of independent certified public accountants will provide the
related Trustee with a report, on or before a specified date of each year
beginning a specified time after the Cut-off Date, stating that:
(1) it has obtained a letter of representation regarding certain
matters from an officer of the Master Servicer or Special
Servicer, which includes an assertion that the Master Servicer or
Special Servicer has complied with certain minimum mortgage loan
servicing standards (to the extent applicable to commercial and
multifamily mortgage loans), identified in the Uniform Single
Attestation Program for Mortgage Bankers established by the
Mortgage Bankers Association of America, with respect to the
Master Servicer's or, if applicable, the Special Servicer's
servicing of commercial and multifamily mortgage loans during the
most recently completed calendar year; and
(2) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of
Certified Public Accountants, the representation is fairly stated
in all material respects, subject only to exceptions and other
qualifications that, in the opinion of such firm, such standards
require it to report.
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In rendering its report the accounting firm may rely, as to the matters
relating to the direct servicing of commercial and multifamily mortgage loans by
sub-servicers, upon comparable reports of firms of independent public
accountants rendered on the basis of examination of those sub-servicers
conducted in accordance with the same standards (rendered within one year of
such report). The prospectus supplement may provide that additional reports of
independent certified public accountants relating to the servicing of mortgage
loans may be required to be delivered to the Trustee.
In addition, the Master Servicer and the Special Servicer generally
will each deliver to the Trustee, the Depositor and each Rating Agency, annually
on or before a date specified in the Pooling and Servicing Agreement, a
statement signed by an officer of the Master Servicer or the Special Servicer,
as applicable, to the effect that, based on a review of its activities during
the preceding calendar year, to the best of that officer's knowledge, the Master
Servicer or the Special Servicer, as applicable, has fulfilled in all material
respects its obligations under the Pooling and Servicing Agreement throughout
such year or, if there has been a default in the fulfillment of any such
obligation, specifying each default known to that officer.
CERTAIN MATTERS WITH RESPECT TO THE MASTER SERVICER, THE SPECIAL SERVICER, THE
TRUSTEE AND THE DEPOSITOR
The Pooling and Servicing Agreement for each series will also provide
that none of the Depositor, the Master Servicer, the Special Servicer, or any
partner, director, officer, employee or agent of the Depositor, the Master
Servicer or the Special Servicer (or any general partner thereof), will be under
any liability to the Trust Fund or the Certificateholders for taking any action
or for refraining from taking any action in good faith pursuant to the Pooling
and Servicing Agreement, or for errors in judgment. However, neither the
Depositor, the Master Servicer, the Special Servicer nor any such person will be
protected against:
(1) any liability for a breach of any representations or warranties
under the Pooling and Servicing Agreement
(2) any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith, fraud or negligence (or, in the case of
the Master Servicer or Special Servicer, if any, a breach of the
servicing standards set forth in the Pooling and Servicing
Agreement) in the performance of its duties or ?by reason of
negligent disregard of its respective obligations and duties
thereunder.
The Pooling and Servicing Agreement will further provide that the
Depositor, the Master Servicer, the Special Servicer, and any partner, director,
officer, employee or agent of the Depositor, the Master Servicer, the Special
Servicer (and any general partner thereof), will be indemnified by the Trust
Fund for any loss, liability or expense incurred in connection with any legal
action relating to the Pooling and Servicing Agreement or the Certificates,
other than any loss, liability or expense incurred by reason of its respective
willful misfeasance, bad faith, fraud or negligence (or, in the case of the
Master Servicer or the Special Servicer, a breach of the servicing standard set
forth in the Pooling and Servicing Agreement) in the performance of duties
thereunder or by reason of negligent disregard of its respective obligations and
duties thereunder. Any loss resulting from such indemnification will reduce
amounts distributable to Certificateholders. The prospectus supplement will
specify any variations to the foregoing required by the Rating Agencies rating a
series of Certificates.
In addition, the Pooling and Servicing Agreement will generally provide
that none of the Depositor, the Special Servicer or the Master Servicer, or any
partner, director, officer, employee or agent of the Depositor, the Master
Servicer or the Special Servicer (or any general partner thereof), will be under
any obligation to appear in, prosecute or defend any legal action that is not
related to its duties under the Pooling and Servicing Agreement and which, in
its opinion, may cause it to incur any expense or liability. The Master Servicer
or the Special Servicer may, in its discretion, undertake any action that is
related to its obligations under the related Pooling and Servicing Agreement and
that it deems necessary or desirable. In such event, the legal expenses of that
action and any resulting liability (except any liability related to the Master
Servicer's or the Special Servicer's obligations to service the Mortgage Loans
in accordance with the servicing standard under the Pooling and Servicing
Agreement) will be expenses of the Trust Fund, and the Master Servicer or
Special Servicer will be entitled to be reimbursed therefor.
Under the Pooling and Servicing Agreement, there may be a successor to
the Master Servicer or the Special Servicer, subject to the following
restrictions:
o each of the Rating Agencies must confirm in writing that any
merger or consolidation and succession of the Master Servicer or
the Special Servicer will not result in a downgrading, withdrawal
or qualification of the rating then assigned by such Rating Agency
to any class of the Certificates; and
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o any additional restrictions on merger or consolidation of the
Master Servicer or the Special Servicer described in the related
prospectus supplement must be satisfied.
A successor of the Master Servicer or the Special Servicer may be:
o any person into which the Master Servicer or the Special Servicer
may be merged or consolidated, or
o any person resulting from any merger or consolidation to which the
Master Servicer or the Special Servicer is a party, or
o any person succeeding to the business of the Master Servicer or
the Special Servicer.
Such a successor will be deemed to have assumed all of the liabilities and
obligations of the Master Servicer or the Special Servicer under the Pooling and
Servicing Agreement.
Generally, the Master Servicer or the Special Servicer may assign its
rights and delegate its duties and obligations under the Pooling and Servicing
Agreement in connection with the sale or transfer of a substantial portion of
its mortgage servicing or asset management portfolio provided that certain
conditions are met, including the written consent of the Trustee and written
confirmation by each of the Rating Agencies that the assignment and delegation
by the Master Servicer or the Special Servicer will not, in and of itself,
result in a downgrading, withdrawal or qualification of the rating then assigned
by such Rating Agency to any class of Certificates. The related Prospectus will
describe any additional restrictions on such assignment.
The Pooling and Servicing Agreement will provide that the Master
Servicer or the Special Servicer may not resign from its obligations and duties
as Master Servicer or Special Servicer thereunder, except upon the determination
that performance of its duties is no longer permissible under applicable law and
provided that the determination is evidenced by an opinion of counsel delivered
to the Trustee. No such resignation or removal will become effective until the
Trustee or a successor Master Servicer or Special Servicer has assumed the
obligations of the Master Servicer or the Special Servicer under the Pooling and
Servicing Agreement.
The Trustee for each Pooling and Servicing 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, the
Master Servicer, the Special Servicer and/or any of their respective affiliates.
The Trustee can resign from its obligations under the Pooling and
Servicing Agreement at any time, in which event a successor Trustee will be
appointed. In addition, the Depositor may remove the Trustee if the Trustee
ceases to be eligible to act as Trustee under the Pooling and Servicing
Agreement or becomes insolvent, at which time the Depositor will appoint a
successor Trustee. The Trustee may also be removed at any time by the holders of
Certificates evidencing the percentage of 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.
The Depositor is not obligated to monitor or supervise the performance
of the Master Servicer, Special Servicer, if any, or the Trustee under the
Pooling and Servicing Agreement.
EVENTS OF DEFAULT
Events of default with respect to the Master Servicer or the Special
Servicer (each, an "Event of Default") under the Pooling and Servicing Agreement
for each series will consist of:
(1) any failure by the Master Servicer or the Special Servicer to
remit to the Collection Account or any failure by the Master
Servicer to remit to the Trustee for deposit into the Distribution
Account any amount required to be remitted pursuant to the Pooling
and Servicing Agreement;
(2) any failure by the Master Servicer or Special Servicer to observe
or perform in any material respect any of its other covenants or
agreements or the breach of its representations or warranties
(which breach materially and adversely affects the interests of
the Certificateholders, the Trustee, the Master Servicer or the
Special Servicer with respect to any Mortgage Loan) which in each
case continues unremedied for 30 days after the giving of written
notice of such
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failure to the Master Servicer or the Special Servicer, as
applicable, by the Depositor or the Trustee, or to the Master
Servicer or Special Servicer, if any, by the Depositor and the
Trustee by the holders of Certificates evidencing Voting Rights of
at least 25% of any affected Class;
(3) confirmation in writing by any of the Rating Agencies that the
then current rating assigned to any class of Certificates would be
withdrawn, downgraded or qualified unless the Master Servicer or
Special Servicer, as applicable, is removed;
(4) certain events of insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings and certain actions
by, on behalf of or against the Master Servicer or Special
Servicer indicating its insolvency or inability to pay its
obligations; or
(5) any failure by the Master Servicer to make a required advance.
The related prospectus supplement may provide for other Events of Default to the
extent required by the Rating Agencies rating a series of Certificates.
RIGHTS UPON EVENT OF DEFAULT
As long as an Event of Default remains unremedied, the Trustee may, and
at the written direction of the holders of Certificates representing 25% of the
aggregate Voting Rights of all Certificates will, terminate all the rights and
obligations of the Master Servicer or Special Servicer, as the case may be. Upon
any termination of the Master Servicer or the Special Servicer, as applicable,
under the Pooling and Servicing Agreement, the Master Servicer or the Special
Servicer, as applicable, will receive all accrued and unpaid servicing
compensation through the date of termination plus, in the case of the Master
Servicer, all advances and interest thereon as provided in the Pooling and
Servicing Agreement.
The holders of Certificates representing at least 66 2/3% of the
aggregate Voting Rights of the Certificates may, on behalf of all holders of
Certificates, waive any default by the Master Servicer or Special Servicer, if
any, in the performance of its obligations under the Pooling and Servicing
Agreement and its consequences, except a default in making any required deposits
to (including advances) or payments from the Collection Account or the
Distribution Account or in remitting payments as received, in each case in
accordance with the Pooling and Servicing Agreement. Upon any waiver of a past
default, that default will cease to exist, and any Event of Default arising
therefrom will be deemed to have been remedied for every purpose of the Pooling
and Servicing Agreement. No such waiver will impair Certificateholder's rights
with respect to subsequent defaults.
On and after the date of termination, the Trustee will succeed to all
authority and power of the Master Servicer or the Special Servicer, as
applicable, under the Pooling and Servicing Agreement and will be entitled to
similar compensation arrangements to which the Master Servicer or the Special
Servicer, as applicable, would have been entitled. The Trustee must appoint, or
petition a court of competent jurisdiction for the appointment of, an
established mortgage loan servicing institution with a net worth of at least
$10,000,000 and that is either Fannie Mae or FHLMC approved (the appointment of
which will not result in the downgrading, withdrawal or qualification of the
rating or ratings then assigned to any class of Certificates as evidenced in
writing by each Rating Agency) to act as successor to the Master Servicer or the
Special Servicer, as applicable, if:
o the Trustee is unwilling or unable to act in such capacity;
o the holders of Certificates representing a majority of the
aggregate Voting Rights request;
o the Trustee is not rated in one of its two highest long-term debt
rating categories by each of the Rating Agencies; or
o the Trustee is not approved as a servicer by the Rating Agencies.
The Trustee will be obligated to act as Master Servicer or Special Servicer as
applicable until a successor is appointed. The Trustee and any such successor
may agree upon the servicing compensation to be paid, which cannot be greater
than the compensation payable to the Master Servicer or the Special Servicer, as
the case may be, under the Pooling and Servicing Agreement.
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No Certificateholder will have the right under the Pooling and
Servicing Agreement to institute any proceeding with respect to the Pooling and
Servicing Agreement or the Mortgage Loans, unless:
o the holder has given the Trustee a written notice of a default
under the Pooling and Servicing Agreement and of the continuance
thereof; and
o the holders of Certificates representing a majority of the
aggregate Voting Rights allocated to each affected class have made
written request of the Trustee to institute the proceeding in its
own name as Trustee under the Pooling and Servicing Agreement and
have offered to the Trustee reasonable indemnity as it may require
against the related costs, expenses and liabilities; and
o the Trustee, for 30 days after its receipt of such notice, request
and offer of indemnity, has neglected or refused to institute such
proceeding.
The Trustee will have no obligation to institute, conduct or defend any
litigation under or related to the Pooling and Servicing Agreement at the
request, order or direction of any of the holders of Certificates, unless the
holders of Certificates have offered to the Trustee reasonable security or
indemnity against the related costs, expenses and liabilities which may be
incurred therein or thereby.
CREDIT ENHANCEMENT
GENERAL
The amounts and types of credit enhancement and the provider thereof
with respect to one or more classes of a series of Certificates or the related
Mortgage Loans ("Credit Enhancement"), if any, will be specified in the related
prospectus supplement. Credit Enhancement may be in the form of a letter of
credit, the subordination of one or more classes of the Certificates of a
series, the establishment of one or more reserve funds, surety bonds,
certificate guarantee insurance, the use of cross-support features, limited
guarantees or another method of Credit Enhancement described in the related
prospectus supplement, or any combination of the foregoing.
It is unlikely that Credit Enhancement will provide protection against
all risks of loss or guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur that exceed the amount
covered by Credit Enhancement or that are not covered by Credit Enhancement,
Certificateholders will bear their allocable share of losses. See "Risk
Factors-Credit Enhancement Limitations."
ENHANCEMENT LIMITATIONS
If Credit 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 the Credit Enhancement;
(b) any conditions to payment of Credit Enhancement not described in
this prospectus;
(c) the conditions (if any) under which the amount payable under the
Credit Enhancement may be reduced and under which the Credit
Enhancement may be terminated or replaced; and
(d) the material provisions of any agreement relating to the Credit
Enhancement.
Additionally, the applicable prospectus supplement will set forth certain
information with respect to the issuer of any third-party Credit Enhancement,
including:
(1) a brief description of its principal business activities;
(2) its principal place of business, the jurisdiction of organization
and the jurisdictions under which it is chartered or licensed to
do business;
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(3) if applicable, the identity of regulatory agencies that exercise
primary jurisdiction over the conduct of its business; and
(4) its total assets and stockholders' or policyholders' surplus, if
applicable, as of the date specified in such prospectus
supplement.
If the holders of any Certificates of any series will be materially dependent
upon the issuer of any third party Credit Enhancement for timely payment of
interest and/or principal on their Certificates, the Depositor will file a
current report on Form 8-K within 15 days after the initial issuance of such
Certificates, which will include any material information regarding such issuer,
including audited financial statements to the extent required.
SUBORDINATE CERTIFICATES
If so specified in the related prospectus supplement, one or more
classes of a series may be subordinate certificates (the "Subordinate
Certificates"). The rights of the holders of Subordinate Certificates to receive
distributions of principal and interest from the Distribution Account on any
Distribution Date will be subordinated to such rights of the holders of senior
Certificates (the "Senior Certificates") to the extent specified in the related
prospectus supplement. In addition, subordination may be affected by the
allocation of losses first to Subordinate Certificates in reduction of the
principal balance of such Certificates until the principal balance thereof is
reduced to zero before any losses are allocated to Senior Certificates. The
Pooling and Servicing Agreement may require a separate trustee other than 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 classes designated as being senior thereto. A series may also include one
or more classes of Subordinate Certificates that will be allocated losses prior
to any losses being allocated to other classes of Certificates designated as
being senior thereto. 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
Enhancement, such as losses arising from damage to property securing a Mortgage
Loan not covered by standard hazard insurance policies.
The related prospectus supplement will describe any subordination in
greater detail and provide, to the extent applicable, information concerning:
(1) the amount of subordination of a class or classes of Subordinate
Certificates in a series,
(2) the circumstances in which subordination will be applicable,
(3) the manner, if any, in which the amount of subordination will
decrease over time,
(4) the manner of funding any related reserve fund,
(5) 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, and
(6) if one or more classes of Subordinate Certificates of a series are
Offered Certificates, the sensitivity of distributions on such
Certificates based on certain default assumptions (see "Risk
Factors-Subordination of Certain Certificates May Result in
Reduced Payments to those Certificates" herein).
RESERVE FUNDS
If so specified in the related prospectus supplement, one or more
reserve funds (each, a "Reserve Fund") may be established with respect to one or
more classes of the Certificates of a series, in which cash, a letter of credit,
Permitted Investments or a combination thereof, in the amounts specified in the
related prospectus supplement will be deposited. The Reserve Funds may also be
funded over time by the deposit of 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.
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Amounts on deposit in any Reserve Fund for one or more classes of
Certificates of a series will be applied by the Trustee for the purposes, in the
manner, and to the extent specified in the related prospectus supplement. A
Reserve Fund may be provided to increase the likelihood of timely payments of
principal of and interest on the Certificates, if required as a condition to the
rating of a series by any Rating Agency. Reserve Funds may be established to
provide limited protection, in an amount satisfactory to a Rating Agency,
against certain types of losses not covered by insurance policies or other
Credit Enhancement. 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 generally will be invested in
Permitted Investments. Generally, any reinvestment income or other gain from
investments will be credited to the related Reserve Fund for a series, and any
loss resulting from investments will be charged to the Reserve Fund. If
specified in the related prospectus supplement, such income or other gain may be
payable to the Master Servicer or Special Servicer, as applicable, as additional
servicing compensation, and any loss resulting from such investment will be
borne by the Master Servicer or Special Servicer, as applicable. The Reserve
Fund for a series will be a part of the Trust Fund only if the related
prospectus supplement so specifies. If the Reserve Fund is not a part of the
Trust Fund, 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 the Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which the required balance will decrease over time, the manner of funding the
Reserve Fund, the purpose for which funds in the Reserve Fund may be applied to
make distributions to Certificateholders and use of investment earnings, if any,
from the Reserve Fund.
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
Enhancement may be provided by a cross-support feature that 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
that includes a cross-support feature will describe the manner and conditions
for applying the cross-support feature.
CERTIFICATE GUARANTEE INSURANCE
If so specified in the related prospectus supplement, certificate
guarantee insurance with respect to a series of Certificates may be provided by
one or more insurance companies. 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. Certificate guarantee
insurance may also guarantee against any payment made to a Certificateholder
that is subsequently recovered 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 SEC as an exhibit to the Form 8-K to be filed with
the SEC within 15 days of issuance of the Certificates of the applicable series.
LIMITED GUARANTEE
If so specified in the prospectus supplement with respect to a series
of Certificates, Credit Enhancement may be provided in the form of a limited
guarantee issued by a guarantor named therein.
LETTER OF CREDIT
If so specified in the prospectus supplement with respect to a series
of a Certificate, Credit Enhancement may be provided by a letter of credit
issued by a bank or financial institution named therein. The coverage, amount
and frequency of any reduction in coverage provided by a letter of credit issued
with respect to one or more classes of Certificates of a series will be set
forth in the related prospectus supplement.
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POOL INSURANCE POLICIES; SPECIAL HAZARD INSURANCE POLICIES
If so specified in the prospectus supplement relating to a series of
Certificates, the Depositor will obtain a pool insurance policy for the Mortgage
Loans in the related Trust Fund. The pool insurance policy will cover any loss
(subject to the limitations described in a related prospectus supplement) by
reason of default to the extent a related Mortgage Loan is not covered by any
primary mortgage insurance policy. The amount and terms of any coverage will be
set forth in the prospectus supplement.
If so specified in the applicable prospectus supplement, the Depositor
will also obtain a special hazard insurance policy for the related Trust Fund in
the amount and with terms set forth in such prospectus supplement for each
series of Certificates as to which a pool insurance policy is provided. The
special hazard insurance policy will, subject to the limitations described in
the applicable prospectus supplement, protect against loss by reason of damage
to Mortgaged Properties caused by certain hazards not insured against under the
standard form of hazard insurance policy for the respective states in which the
Mortgaged Properties are located.
SURETY BONDS
If so specified in the prospectus supplement relating to a series of
Certificates, Credit Enhancement with respect to one or more classes of
Certificates of a series may be provided by the issuance of a surety bond issued
by a financial guarantee insurance company named therein. The coverage, amount
and frequency or any reduction in coverage provided by a surety bond will be set
forth in the prospectus supplement relating to such series.
FRAUD COVERAGE
If so specified in the applicable prospectus supplement, losses
resulting from fraud, dishonesty or misrepresentation in connection with the
origination or sale of the Mortgage Loans may be covered to a limited extent by
(1) representations and warranties to the effect that no such fraud, dishonesty
or misrepresentation had occurred, (2) a Reserve Fund, (3) a letter of credit or
(4) some other method. The amount and terms of any fraud coverage will be set
forth in the applicable prospectus supplement.
MORTGAGOR BANKRUPTCY BOND
If so specified in the applicable prospectus supplement, losses
resulting from a bankruptcy proceeding relating to a mortgagor or obligor
affecting the Mortgage Loans in a Trust Fund with respect to a series of
Certificates may be covered under a mortgagor bankruptcy bond (or any other
instrument that will not result in a withdrawal, downgrading or qualification of
the rating of the Certificates of a series by any of the Rating Agencies that
rated any Certificates of such series). Any mortgagor bankruptcy bond or other
instrument will provide for coverage in an amount and with terms meeting the
criteria of the Rating Agencies rating any Certificates of the related series as
described in the related prospectus supplement.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains general summaries of some legal
aspects of mortgage loans. 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.
GENERAL
All of the Mortgage Loans are loans evidenced by (or, in the case of
mortgage pass-through certificates, supported by) a note or bond that is secured
by a lien and security interest in property created under related security
instruments, which may be mortgages, deeds of trust or deeds to secure debt,
depending upon the prevailing practice and law in the state in which the
Mortgaged Property is located. As used in this prospectus, unless the context
otherwise requires, the term "mortgage" includes mortgages, deeds of trust and
deeds to secure debt. Any of the foregoing mortgages will create a lien upon, or
grant a title interest in, the mortgaged property. The priority of the lien or
title interest created by each mortgage will depend on:
o the terms of the mortgage;
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o the existence of any separate contractual arrangements with others
holding interests in the mortgaged property;
o the order of recordation of the mortgage in the appropriate public
recording office; and
o the actual or constructive knowledge of the mortgagee as to any
unrecorded liens, leases or other interests affecting the
mortgaged property.
Mortgages typically do not possess priority over governmental claims for real
estate taxes, assessments and, in some states, for reimbursement of remediation
costs of certain environmental conditions. See "Environmental Risks." In
addition, the Tax Code provides priority to certain tax liens over the lien of
the mortgage. The mortgagor 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.
TYPES OF MORTGAGE INSTRUMENTS
A mortgage either creates a lien against or constitutes a conveyance of
an interest in real property between two parties: a mortgagor (the borrower and
usually the owner of the subject property) and a mortgagee (the lender).
A deed of trust is a three-party instrument, wherein a trustor (the
equivalent of a mortgagor), grants the property to a trustee, in trust with a
power of sale, for the benefit of a beneficiary (the lender) as security for the
payment of the secured indebtedness.
A deed to secure debt is a two party instrument wherein the grantor
(the equivalent of a mortgagor) conveys title to, as opposed to merely creating
a lien upon, the subject property to the grantee (the lender) until such time as
the underlying debt is repaid, generally with a power of sale as security for
the indebtedness evidenced by the related note.
As used herein, unless the context otherwise requires, the term
"mortgagor" includes a mortgagor under a mortgage, a trustor under a deed of
trust and a grantor under a deed to secure debt, and the term, "mortgagee"
includes a mortgagee under a mortgage, a beneficiary under a deed of trust and a
grantee under a deed to secure debt. The mortgagee's authority under a mortgage,
the beneficiary's and trustee's authority under a deed of trust and the
grantee's authority under a deed to secure debt are governed by the express
provisions of the mortgage, the law of the state in which the real property is
located, certain federal laws and, in some cases, with respect to a trustee in
deed of trust transactions, the directions of the beneficiary. The Mortgage
Loans (other than Installment Contracts) will consist of (or, in the case of
mortgage pass-through certificates, be supported by) loans secured by mortgages.
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, leasehold 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, in the mortgage or in a separate
agreement with the landlord or other party to such instrument, to protect the
mortgagee against termination of such interest before the mortgage is paid.
PERSONALTY
Certain types of mortgaged properties, such as nursing homes, hotels,
motels and industrial plants, are likely to derive a significant part of their
value from personal property that does not constitute "fixtures" under
applicable state real property law, and therefore, would not be subject to the
lien of a mortgage. Such property is generally pledged or assigned as security
to the mortgagee under the Uniform Commercial Code ("UCC"). To perfect its
security interest in such property, the mortgagee generally must file UCC
financing statements and, to maintain perfection of such security interest, file
continuation statements generally every five years.
INSTALLMENT CONTRACTS
The Mortgage Loans may also consist of Installment Contracts (also
sometimes called contracts for deed). Under an Installment Contract, the seller
(referred to in this section as the "mortgagee") retains legal title to the
property and enters into an agreement with the purchaser (referred to in this
Section as the "mortgagor") for the payment of the purchase price plus interest,
over the term of such Installment Contract. Only after full performance by the
mortgagor of the Installment Contract is the
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mortgagee obligated to convey title to the property to the mortgagor. As with
mortgage or deed of trust financing, during the effective period of the
Installment Contract, the mortgagor 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 mortgagee under an
Installment Contract varies on a state-by-state basis depending upon the extent
to which state courts are willing or able to enforce the Installment Contract
strictly according to its terms. The terms of Installment Contracts generally
provide that upon a default by the mortgagor, the mortgagor loses his or her
right to occupy the property, the entire indebtedness is accelerated and the
mortgagor's equitable interest in the property is forfeited. The mortgagee in
such a situation does not have to foreclose to obtain title to the property,
although in some cases both a quiet title action to clear title to the property
(if the mortgagor has recorded notice of the Installment Contract) and an
ejectment action to recover possession may be necessary. In a few states,
particularly in cases of a default during the early years of an Installment
Contract, ejectment of the mortgagor and a forfeiture of his or her interest in
the properly will be permitted. However, in most states, laws (analogous to
mortgage laws) have been enacted to protect mortgagors under Installment
Contracts from the harsh consequences of forfeiture. These laws may require the
mortgagee to pursue a judicial or nonjudicial foreclosure with respect to the
property, give the mortgagor a notice of default and some grace period during
which the Installment Contract may be reinstated upon full payment of the
default amount. Additionally, the mortgagor may have a post-foreclosure
statutory redemption right, and, in some states, a mortgagor with a significant
equity investment in the property may be permitted to share in the proceeds of
any sale of the property after the indebtedness is repaid or may otherwise be
entitled to a prohibition of the enforcement of the forfeiture clause.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGEES OR BENEFICIARIES
Some of the Mortgage Loans may be secured by junior mortgages that are
subordinate to senior mortgages held by other lenders or institutional
investors. In such cases, the rights of the Trust Fund (and therefore the
Certificateholders), as mortgagee under a junior mortgage, will be subordinate
to those of the mortgagee under the senior mortgage, including the prior rights
of the senior mortgagee to:
(1) receive rents, hazard insurance proceeds and condemnation
proceeds; and
(2) cause the property securing the Mortgage Loan to be sold upon the
occurrence of a default under the senior mortgage, thereby
extinguishing the lien of the junior mortgage, unless the Master
Servicer or Special Servicer, if applicable, either asserts such
subordinate interest in the related property in the foreclosure of
the senior mortgage (to the extent permitted by state law) or
satisfies the defaulted senior loan.
As discussed more fully below, in many states a junior mortgagee 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 or the existence of a
recorded request for notice in compliance with applicable state law (if any), no
notice of default is typically required to be given to the junior mortgagee.
The form of the mortgage used by many institutional lenders confers on
the mortgagee 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 those proceeds and awards to any indebtedness secured
by the mortgage in the order the mortgagee 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 (or any part thereof) is taken by condemnation, the
mortgagee under the senior mortgage will have the prior right to collect any
applicable insurance proceeds and condemnation awards and to apply the same to
the indebtedness secured by the senior mortgage. However, the laws of certain
states may provide that unless the security of the mortgagee has been materially
impaired, the mortgagor must be allowed to use any applicable insurance proceeds
or partial condemnation awards to restore the property.
The form of mortgage used by many institutional lenders typically
contains a "future advance" clause that provides that additional amounts
advanced to or on behalf of the mortgagor by the mortgagee are to be secured by
the mortgage. The "future advance" clause is valid under the laws of most
states. In some states, however, the priority of any advance made under the
clause depends upon whether the advance was an "obligatory" or "optional"
advance. If the mortgagee is obligated to advance the additional amounts, the
advance may be entitled to receive the same priority as amounts initially made
under the mortgage, notwithstanding that other junior mortgages or other liens
may have encumbered the property between the date of recording of the senior
mortgage and the date of the future advance and that the mortgagee had actual
knowledge of such intervening junior mortgages or other liens at the time of the
advance. If the mortgagee is not obligated to advance the additional amounts and
has
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actual knowledge of any such intervening junior mortgages or other liens,
the advance may be subordinate to the intervening junior mortgages or other
liens. In many other states, all advances under a "future advance" clause are
given the same priority as amounts initially made under the mortgage so long as
advances do not exceed a specified "credit limit" amount stated in the recorded
mortgage.
Another provision typically found in the form of the mortgage used by
many institutional lenders obligates the mortgagor:
(1) to pay all taxes and assessments affecting the property before
delinquency;
(2) to pay, when due, all other encumbrances, charges and liens
affecting the property that may be prior to the lien of the
mortgage;
(3) to provide and maintain hazard insurance on the property;
(4) to maintain and repair the property and not to commit or permit
any waste thereof; and
(5) to appear in and defend any action or proceeding purporting to
affect the property or the rights of the mortgagee under the
mortgage.
Upon a failure of the mortgagor to perform any of these obligations, the
mortgage typically provides the mortgagee the option to perform the obligation
itself, with the mortgagor agreeing to reimburse the mortgagee for any sums
expended by the mortgagee in connection therewith (which typically become part
of the indebtedness secured by the mortgage).
The form of mortgage used by many institutional lenders also typically
requires the mortgagor to obtain the consent of the mortgagee as to all actions
affecting the mortgaged property, including, among others:
o all leasing activities (including new leases and termination or
modification of existing leases),
o any alterations, modifications or improvements to the buildings
and other improvements forming a part of the mortgaged property,
and
o all property management activities affecting the mortgaged
property (including new management or leasing agreements or any
termination or modification of existing management or leasing
agreements).
Tenants will often refuse to execute a lease unless the mortgagee 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 may refuse to consent
to matters approved by a junior mortgagee with the result that the value of the
security for the junior mortgage is diminished. For example, a senior mortgagee
may decide not to approve a lease or refuse to grant to a tenant a
non-disturbance agreement and as a result the value of the mortgaged property
may be diminished.
FORECLOSURE
Foreclosure is a legal procedure that allows the mortgagee to recover
its mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the mortgagor defaults in payment or performance of its obligations
under the note or mortgage and, by reason thereof, the indebtedness has been
accelerated, the mortgagee has the right to institute foreclosure proceedings to
sell the mortgaged property at public auction to satisfy the indebtedness.
Foreclosure procedures with respect to the enforcement of a mortgage vary from
state to state. Although there are other foreclosure procedures available in
some states that are either infrequently used or available only in certain
limited circumstances, the two primary methods of foreclosing a mortgage are
judicial foreclosure and non-judicial foreclosure pursuant to a power of sale
granted in the mortgage. In either case, the actual foreclosure of the mortgage
will be accomplished pursuant to a public sale of the mortgaged property by a
designated official or by the trustee under a deed of trust. The purchaser at
any foreclosure sale acquires only the estate or interest in the mortgaged
property encumbered by the mortgage. For example, if the mortgage only
encumbered a tenant's leasehold interest in the property, the purchaser will
only acquire that leasehold interest, subject to the tenant's obligations under
the lease to pay rent and perform other covenants contained therein.
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Judicial Foreclosure.
A judicial foreclosure of a mortgage is a 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 the necessary parties to the action. Since a
judicial foreclosure is a lawsuit, it is subject to all of the procedures,
delays and expenses attendant to litigation, sometimes requiring up to several
years to complete if contested. At the completion of a judicial foreclosure, if
the mortgagee prevails, the court ordinarily issues a judgment of foreclosure
and appoints a referee or other designated official to conduct a public sale of
the property. These sales are made in accordance with procedures that vary from
state to state.
Non-Judicial Foreclosure.
In the majority of cases, foreclosure of a deed of trust (and in some
instances, other types of mortgage instruments) is accomplished by a
non-judicial trustee's sale pursuant to a provision in the deed of trust that
authorizes the trustee, generally following a request from the beneficiary, to
sell the mortgaged property at public sale upon any default by the mortgagor
under the terms of the note or deed of trust. In addition to the specific
contractual requirements set forth in the deed of trust, a non-judicial
trustee's sale is also typically subject to any applicable judicial or statutory
requirements imposed in the state where the mortgaged property is located. The
specific requirements that must be satisfied by a trustee prior to the trustee's
sale vary from state to state. Examples of the varied requirements imposed by
certain states are:
(1) that notices of both the mortgagor's default and the mortgagee's
acceleration of the debt be provided to the mortgagor;
(2) that the trustee record a notice of default and send a copy of the
notice to the mortgagor, any other person having an interest in
the real property, including any junior lienholders, any person
who has recorded a request for a copy of a notice of default and
notice of sale, any successor in interest to the mortgagor and to
certain other persons;
(3) that the mortgagor, 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, in certain states, certain allowed costs and expenses
incurred by the mortgagee in connection with the default; and
(4) the method (publication, posting, recording, etc.), timing,
content, location and other particulars as to any required public
notices of the trustee's sale.
Foreclosure of a deed to secure debt is generally accomplished by a non-judicial
sale similar to that required by a deed of trust, except that the mortgagee or
its agent, rather than a trustee, is typically empowered to perform the sale in
accordance with the terms of the deed to secure debt and applicable law.
Limitations on Mortgagee's Rights.
Courts may apply general equitable principles in connection with
foreclosure proceedings to limit a mortgagee's remedies. These equitable
principles are generally designed to relieve the mortgagor from the legal effect
of his defaults under the loan documents to the extent such effect is determined
to be harsh or unfair. Examples of judicial remedies that have been fashioned
include requiring mortgagees to undertake affirmative and expensive actions to
determine the causes of the mortgagor's default and the likelihood that the
mortgagor will be able to reinstate the loan, requiring the mortgagees to
reinstate loans or recast payment schedules to accommodate mortgagors who are
suffering from temporary financial disability, and limiting the rights of
mortgagees to foreclose if the default under the mortgage instrument is not
monetary, such as the mortgagor's failing to maintain the property adequately or
executing a second mortgage affecting the property.
Even if a foreclosure is allowed, a third party may be unwilling to
purchase the property at the foreclosure sale for a variety of reasons,
including the difficulty of determining the exact status of title to the
mortgaged property, the potential existence of redemption rights (see "Rights of
Redemption" below) and because the physical condition and financial performance
of the mortgaged property may have deteriorated during the foreclosure
proceedings. Some states require the mortgagee to disclose all known facts
materially affecting the value of the mortgaged property to potential bidders at
a trustee's sale, which may have an adverse affect on the trustee's ability to
sell the mortgaged property or the sale price thereof. A 1980 decision of the
United States Court of Appeals for the Fifth Circuit (Durrett v. Washington
National Insurance Company) suggested that even a non-collusive,
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regularly conducted foreclosure sale could be a fraudulent transfer under the
federal Bankruptcy Code, as amended from time to time (11 U.S.C.) (the
"Bankruptcy Code") if (1) the foreclosure sale was held while the debtor was
insolvent and not more than one year before the filing of the bankruptcy
petition; and (2) the price paid for the foreclosed property did not represent
"fair consideration." In 1994, the United States Supreme Court rejected such an
interpretation of the Bankruptcy Code. However, the reasoning in the Durrett
case could nonetheless be persuasive to courts interpreting state fraudulent
conveyance law with provisions similar to the Bankruptcy Code provisions
construed in Durrett.
For the reasons discussed in the prior paragraph, it is common for the
mortgagee to purchase the property from the trustee, referee or other designated
official for an amount equal to or less than the outstanding principal amount of
the secured indebtedness, together with accrued and unpaid interest and the
expenses of foreclosure to extinguish the secured debt. A mortgagee commonly
incurs substantial legal fees and court costs in acquiring a mortgaged property
through contested foreclosure and/or bankruptcy proceedings. In addition, a
mortgagee 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. The mortgagee also assumes the burdens of ownership and management
of the property (frequently through the employment of a third party management
company), including third party liability, paying operating expenses and real
estate taxes and making repairs, until a sale of the property to a third party
can be arranged. 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 mortgaged properties that 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 these
operations and the effect that foreclosure and a change in ownership may have on
the public's and the industry's (including franchisers') perception of the
quality of such operations. The mortgagee 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 mortgagee's investment in the property.
As a result, a mortgagee 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.
Under the REMIC Regulations and the related Pooling and Servicing
Agreement, the Master Servicer or Special Servicer, if any, may be permitted
(and in some cases may be required) to hire an independent contractor to operate
any REO Property which could result in significantly greater costs than direct
operation by the Master Servicer or Special Servicer, if any. See "Servicing of
the Mortgage Loans-Collections and Other Servicing Procedures."
Rights of Redemption.
The purposes of a foreclosure are to enable the mortgagee to realize
upon its security and to bar the mortgagor, and all persons who have an interest
in the property that is subordinate to the mortgage being foreclosed, from any
exercise of their "equity of redemption." The doctrine of equity of redemption
provides that until the property covered by a mortgage has been sold in
accordance with a properly conducted foreclosure sale, those having an interest
that is subordinate to that of the foreclosing mortgagee have an equity of
redemption and may redeem the property by paying the entire debt with interest.
In addition, in some states, when a foreclosure action has been commenced, the
redeeming party must pay certain costs of such action. Persons having an equity
of redemption must generally be made parties and joined in the foreclosure
proceeding in order for their equity of redemption to be cut off and terminated.
Equity of redemption is generally a common-law (non-statutory) right that only
exists prior to completion of the foreclosure sale and is not waivable by the
mortgagor.
In contrast to the common law doctrine of equity of redemption, in some
states, the mortgagor and foreclosed junior lienors are given a statutory period
(1) prior to the foreclosure sale, in which to reinstate the mortgage in good
standing by paying past due amounts and certain costs of the mortgage and (2)
after the completion of the foreclosure sale, in which to redeem the property
from the foreclosure sale by payment of a redemption price. The required
redemption price varies from state to state. Some states require the payment of
the entire principal balance of the loan, accrued interest and expenses of
foreclosure, others require the payment of the foreclosure sale price, while
other states require the payment of only a portion of the sums due. The effect
of a statutory right of redemption is to diminish the ability of the mortgagee
to sell the foreclosed property (or to depress the price received by the
mortgagee at the foreclosure sale). The exercise of a statutory right of
redemption may defeat the title of any purchaser at a foreclosure sale or any
purchaser from the mortgagee after a foreclosure sale.
Consequently, the practical effect of the redemption right is often to
force the mortgagee to retain the property and pay the expenses of ownership
until the redemption period has run. Certain states permit a mortgagee to
invalidate an attempted
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exercise of a statutory redemption right by waiving its right to any deficiency
judgment. In some states, there is no right to redeem property after a trustee's
sale under a deed of trust.
Under the REMIC Regulations currently in effect, property acquired by
foreclosure generally must not be held for more than two years. With respect to
a series of Certificates for which an election is made to qualify the Trust Fund
or a part thereof as a REMIC, the Pooling and Servicing Agreement will permit
foreclosed property to be held for more than two years if the Trustee receives
(a) an extension from the IRS or (b) an opinion of counsel to the effect that
holding the property for that period is permissible under the REMIC Regulations.
Mortgagors under Installment Contracts generally do not have the
benefits of redemption periods such as those that exist in the same jurisdiction
for mortgage loans. If redemption statutes do exist under state laws for
Installment Contracts, the redemption period may be shorter than for mortgages.
Anti-Deficiency Legislation.
Some of the Mortgage Loans will be nonrecourse loans where recourse may
be had only against the specific property pledged to secure the related Mortgage
Loan and not against the mortgagor's other assets in the event of default by a
mortgagor. Even if a mortgage by its terms provides for recourse against the
mortgagor, certain states have imposed prohibitions against or limitations upon
such recourse. For example, some state statutes limit the right of the mortgagee
to obtain a deficiency judgment against the mortgagor following foreclosure or
sale under a deed of trust. A deficiency judgment is a personal judgment against
the former mortgagor 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 mortgagee. Other statutes require the mortgagee to exhaust the security
afforded under a mortgage by foreclosure in an attempt to satisfy the full debt
before bringing a personal action against the mortgagor. In certain states, the
mortgagee has the option of bringing a personal action against the mortgagor on
the debt without first exhausting its security, however, in some of these
states, a mortgagee choosing to pursue such an action may be deemed to have
elected its remedy and may be precluded from exercising any remedies with
respect to the security. Consequently, the practical effect of the election
requirement, when applicable, is that mortgagees will usually proceed first
against the security rather than bringing personal action against the mortgagor.
Other statutory provisions limit any deficiency judgment against the former
mortgagor following a judicial sale to the excess of the outstanding debt over
the fair market value of the property at the time of the public sale. The
purpose of these statutes is generally to prevent a mortgagee from obtaining a
large deficiency judgment against the former mortgagor as a result of low bids,
or the absence of bids, at the judicial sale.
Leasehold Risks.
Certain of the Mortgage Loans may be secured by a mortgage encumbering
the mortgagor's leasehold interest under a ground lease. Leasehold mortgages are
subject to certain risks not associated with mortgages encumbering a fee
ownership interest in the mortgaged property. The most significant of these
risks is that the ground lease creating the leasehold estate could terminate,
depriving the leasehold mortgagee of its security. The ground lease may
terminate if, among other reasons, the ground lessee breaches or defaults in its
obligations under the ground lease or there is a bankruptcy of the ground lessee
or the ground lessor. Examples of protective provisions that may be included in
the related ground lease, or a separate agreement between the ground lessee, the
ground lessor and the mortgagee, to minimize such risk are:
(1) the right of the mortgagee to receive notices from the ground
lessor of any defaults by the mortgagor;
(2) the right to cure any defaults, with adequate cure periods;
(3) if a default is not susceptible to cure by the mortgagee, the
right to acquire the leasehold estate through foreclosure or
otherwise prior to any termination of the ground lease;
(4) the ability of the ground lease to be assigned to and by the
mortgagee or a purchaser at a foreclosure sale and for a release
of the assigning ground lessee's liabilities thereunder;
(5) the right of the mortgagee to enter into a ground lease with the
ground lessor on the same terms and conditions as the old ground
lease in the event of a termination thereof; and
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(6) provisions for disposition of any insurance proceeds or
condemnation awards payable upon a casualty to, or condemnation
of, the mortgaged property.
In addition to the foregoing protections, the leasehold mortgage may prohibit
the ground lessee from treating the ground lease as terminated in the event of
the ground lessor's bankruptcy and rejection of the ground lease by the trustee
for the debtor-ground lessor, and may assign to the mortgagee the debtor-ground
lessee's right to reject a lease pursuant to Section 365 of the Bankruptcy Code,
although the enforceability of such assignment has not been established. An
additional manner in which to obtain protection against the termination of the
ground lease is to have the ground lessor enter into a mortgage encumbering the
fee estate in addition to the mortgage encumbering the leasehold interest under
the ground lease, so if the ground lease is terminated, the mortgagee may
nonetheless possess rights contained in the fee mortgage. Without the
protections described in this paragraph, a leasehold mortgagee may be more
likely to lose the collateral securing its leasehold mortgage. No assurance can
be given that any or all of these protective provisions will be obtained in
connection with any particular Mortgage Loan.
Bankruptcy Laws.
Mortgagors often file bankruptcy to delay or prevent exercise of
remedies under loan documents. Numerous statutory and common law provisions,
including the Bankruptcy Code and state laws affording relief to debtors, may
interfere with and delay the ability of a mortgagee 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 (although "adequate
protection" payments for anticipated diminution, if any, in the value of the
mortgaged property may be made). The delay and consequences caused by an
automatic stay can be significant. A particular mortgagor may become subject to
the Bankruptcy Code either by voluntary or involuntary petition or by virtue of
the doctrine of "substantive consolidation" by an affiliate of the mortgagor
becoming a debtor under the Bankruptcy Code. Additionally, the filing of a
petition in bankruptcy by or on behalf of a junior lienor or junior mortgagee
may stay the senior mortgagee from taking action to foreclose out the junior
lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the mortgagee 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 amount of the mortgagee's security interest), thus
leaving the mortgagee a general unsecured creditor for the difference between
the then current 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 acceleration) of the
final maturity date. Some bankruptcy courts have approved plans, based on the
particular facts of the reorganization case before them, that affected the
curing of a mortgage loan default by paying arrearages over a number of years. A
bankruptcy court may also permit a debtor to de-accelerate a secured loan and to
reinstate the loan even though the mortgagee had accelerated the loan and final
judgment of foreclosure had been entered in state court (provided no sale of the
property had yet occurred) before the filing of the debtor's petition, 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.
Federal bankruptcy law may interfere with or affect the ability of a
mortgagee to enforce an assignment of rents and leases or a security interest in
hotel revenues related to the mortgaged property. In connection with a
bankruptcy proceeding involving a mortgagor, Section 362 of the Bankruptcy Code
automatically stays any attempts by the mortgagee to enforce any assignment of
rents and leases or security interest. The legal proceedings necessary to
resolve such a situation can be time-consuming and may result in significant
delays in the receipt of the rents or hotel revenues. Rents or hotel revenues
may also be lost:
(1) if the assignment or security interest is not fully documented or
perfected under state law before commencement of the bankruptcy
proceeding;
(2) to the extent rents or hotel revenues are used by the mortgagor to
maintain the mortgaged property or for other court authorized
expenses;
(3) to the extent other collateral may be substituted therefor; and
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(4) if the bankruptcy court determines that it is necessary or
appropriate "based on the equities of the case."
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 the
lessee under the lease. Under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a lessee results in an automatic stay barring the
commencement or continuation of any state court proceeding for past due rent,
accelerated rent, damages or a summary eviction order with respect to a default
under the lease that occurred before the filing of the lessee's petition.
In addition, the Bankruptcy Code generally provides that a bankruptcy
trustee or debtor in possession may, subject to approval of the bankruptcy
court, either (1) assume the lease and retain it or assign it to a third party
or (2) reject the lease. If the lease is assumed, the bankruptcy 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. There may
be a significant period of time between the date that a lessee files a
bankruptcy petition and the date that 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 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 lessor 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 certain 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. If a Mortgage Loan includes any
guaranty, and the guaranty waives any rights of subrogation or contribution,
then certain payments by the guarantor to the Trust Fund also may be avoided and
recovered as fraudulent conveyances.
A trustee in bankruptcy or a debtor in possession or various creditors
who extend credit after a case is filed may be entitled to collect costs and
expenses in preserving or selling the mortgaged property ahead of payment to the
mortgagee. In certain circumstances, a trustee in bankruptcy or debtor in
possession may have the power to grant liens senior to or pari passu with the
lien of a mortgage, and analogous state statutes and general principles of
equity may also provide a mortgagor with means to halt a foreclosure proceeding
or sale and enforce a restructuring of a mortgage loan on terms a mortgagee
would not otherwise accept.
A trustee in bankruptcy or a debtor in possession also may be entitled
to subordinate the lien created by the mortgage loan to other liens or the
claims of general unsecured creditors. Generally, this requires proof of
"unequitable conduct" by the mortgagee. However, various courts have expanded
the grounds for equitable subordination to apply to various non-pecuniary claims
for such items as penalties and fines. A court may find that any prepayment
charge, various late payment charges and other claims by mortgagees may be
subject to equitable subordination on these grounds.
A trustee in bankruptcy or a debtor in possession also may be entitled
to avoid all or part of any claim or lien by the mortgagee if and to the extent
a judgment creditor or a bona fide purchaser of real estate could have done so
outside of bankruptcy. Generally, in circumstances involving some defect in the
language, execution or recording of the mortgage loan documents.
ENVIRONMENTAL RISKS
Real property pledged as security to a mortgagee may be subject to
environmental risks arising from the presence of hazardous materials on, under,
adjacent to, or in such property. The environmental condition of mortgaged
properties may be affected by the actions and operations of tenants and
occupants of the properties. Mortgaged properties that are, or have been, the
site of manufacturing, industrial or disposal activity or have been built with
or contain asbestos-containing material or other indoor pollutants pose
particular concerns. In addition, current and future environmental laws,
ordinances or regulations, including new requirements developed by federal
agencies pursuant to the mandates of the Clean Air Act Amendments of 1990, may
impose additional compliance obligations on business operations that can be met
only by significant capital expenditures.
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"Hazardous materials" are generally defined as any dangerous, toxic or
hazardous pollutants, chemicals, wastes or substances, including, among others,
those so identified in CERCLA or any other environmental laws now existing. More
specifically, "hazardous materials" include, among others, asbestos and
asbestos-containing materials, polychlorinated biphenyls, radon gas, petroleum
and petroleum products, urea formaldehyde and any substances classified as being
"in inventory," "usable work in process" or a similar classification that would,
if classified as unusable, be included in the foregoing definition.
A mortgagee may be exposed to risks related to environmental conditions
including:
o a diminution in the value of a mortgaged property;
o potential default on a mortgage loan due to the mortgagor's
inability to pay high remediation costs or difficulty in bringing
its operations into compliance with environmental laws;
o in certain circumstances as more fully described below, liability
for clean-up costs or other remedial actions which could exceed
the value of the mortgaged property or the unpaid balance of the
related mortgage loan; or
o the inability to sell the related Mortgage Loan in the secondary
market. In certain circumstances, a mortgagee may choose not to
foreclose on contaminated property rather than risk incurring
liability for remedial actions.
A mortgagee may be obligated to disclose environmental conditions on a
property to government entities and/or to prospective buyers (including
prospective buyers at a foreclosure sale or following foreclosure), which may
decrease the amount that prospective buyers are willing to pay for the affected
property, sometimes substantially, and thereby decrease the ability of the
mortgagee to recoup its investment in a loan upon foreclosure.
In certain states, transfers of some types of properties are
conditioned upon cleanup of contamination prior to transfer. In these cases, a
mortgagee that becomes the owner of a property through foreclosure, deed in lieu
of foreclosure or otherwise, may be required to clean up the contamination
before selling or otherwise transferring the property.
Under federal and certain states' laws, 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 federal and state regulatory agencies. In several
states this lien has priority over the lien of an existing mortgage against the
property. Since 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.
CERCLA and Related Laws
Under certain circumstances, it is possible that environmental cleanup
costs, or the obligation to take remedial actions, can be imposed on a mortgagee
such as the Trust Fund with respect to each series. Under the laws of some
states and under CERCLA, strict liability may be imposed on present and past
"owners" and "operators" of contaminated real property for the costs of
clean-up. Liability under many of these federal and state laws may exist even if
the mortgagee did not cause or contribute to the contamination and regardless of
whether the mortgagee has actually taken possession of a mortgaged property
through foreclosure, deed in lieu of foreclosure or otherwise. Moreover, such
liability is not limited to the original or unamortized principal balance of a
loan or to the value of the property securing a loan.
CERCLA's definition of "owner" or "operator" excludes persons "who
without participating in the management of the facility, holds indicia of
ownership primarily to protect his security interest". This is known as the
"secured creditor exemption." The Asset Conservation, Lender Liability, and
Deposit Insurance Protection Act of 1996 (the "Lender Liability Act") clarifies
CERCLA's secured creditor exemption. Under the Lender Liability Act, a secured
lender who is "participating in management" by exercising control over
operational aspects of the facility will be liable, but a number of
environmentally related activities before the loan is made and during its
pendency as well as "workout" steps to protect a security interest are not
construed as participating in management and will not trigger liability. The
Lender Liability Act also identifies the circumstances in which foreclosure and
post-closure activities will not trigger CERCLA liability. The Lender Liability
Act also amends the Solid Waste Disposal Act to limit the liability of lenders
holding a security interest for costs of cleaning up contamination from
underground storage tanks. However, the Lender Liability Act has no effect on
state environmental laws similar to CERCLA that may not provide a secured
creditor exemption.
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CERCLA's "innocent landowner" defense to strict liability may be
available to a mortgagee that has taken title to a mortgaged property and has
performed an appropriate environmental site assessment that does not disclose
existing contamination and meets other requirements of the defense. However, it
is unclear whether the environmental site assessment must be conducted upon loan
origination, before foreclosure or both, and uncertainty exists as to what kind
of environmental site assessment must be performed to qualify for the defense.
Beyond statute-based environmental liability, hazardous environmental
conditions on a property may also be subject to common law causes of action (for
example, causes of actions arising from death, personal injury or damage to
property). Although it may be more difficult to hold a mortgagee liable in such
cases, unanticipated or uninsured liabilities of the mortgagor may jeopardize
the mortgagor's ability to meet its loan obligations. 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 Pooling and Servicing Agreement contains provisions
restricting the ability of the Master Servicer or the Special Servicer, if any,
to acquire title to any Mortgaged Property or take over its operation unless a
satisfactory phase I or other specified environmental assessment has been
obtained. Enforcement of the security for the related Note is precluded until a
satisfactory environmental assessment is obtained and/or any required remedial
action is taken. This requirement will reduce the likelihood that a given Trust
Fund will become liable for any environmental conditions affecting a Mortgaged
Property, but will make it more difficult to realize on the security for the
Mortgage Loan. There can be no assurance that any environmental assessment
obtained by the Master Servicer or the Special Servicer, if any, will detect all
possible environmental conditions or that the other requirements of the Pooling
and Servicing Agreement, even if fully observed by the Master Servicer or the
Special Servicer, if any, will in fact insulate a given Trust Fund from
liability for environmental conditions.
If a mortgagee 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
without substantial assets, bankrupt or otherwise judgment proof. Furthermore,
an action against the mortgagor 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 mortgagee to exhaust its security
before bringing a personal action against the mortgagor (see "Anti-Deficiency
Legislation" above) may curtail the mortgagee's ability to recover from its
mortgagor the environmental clean-up and other related costs and liabilities
incurred by the mortgagee. Accordingly, it is possible that these costs could
become a liability of the Trust Fund and become a loss to the
Certificateholders. Shortfalls occurring as the result of imposition of any
clean-up costs will be addressed in the prospectus supplement and Pooling and
Servicing Agreement for the related series.
Other Environmental Risks
Other environmental laws may affect the value of a mortgaged property,
or impose cleanup costs or liabilities, including those related to asbestos,
radon, lead paint and underground storage tanks.
Certain federal, state and local laws, regulations and ordinances
govern the handling of asbestos-containing materials ("ACMs") in the event of
the remodeling, renovation or demolition of a building. These laws, as well as
common law standards, may impose liability for releases of ACMs and may allow
third parties to seek recovery from owners or operators of real properties for
personal injuries associated with such releases. In addition, federal law
requires that building owners inspect their facilities for ACMs and presumed
ACMs (consisting of thermal system insulation, surfacing materials and asphalt
and vinyl flooring in buildings constructed before 1981) and transfer all
information regarding ACMs and presumed ACMs in their facilities to successive
owners.
The United States Environmental Protection Agency (the "EPA') has
concluded that radon gas, a naturally occurring substance, is linked to
increased risks of lung cancer. Although there are no current federal or state
requirements mandating radon gas testing, the EPA and the United States Surgeon
General recommend testing residences for the presence of radon and that
abatement measures be undertaken if radon concentrations in indoor air meet or
exceed specified limits.
The Residential Lead-Based Paint Hazard Reduction Act of 1992 (the
"Lead Paint Act") requires federal agencies to promulgate regulations that will
require owners of residential housing constructed before 1978 to disclose to
potential residents or purchasers any known lead-paint hazards. The Lead Paint
Act creates a private right of action with treble damages available for any
failure to so notify. Federal agencies have issued regulations delineating the
scope of this disclosure obligation which became effective in September of 1996
for owners of more than four residential dwellings and in December of 1996 for
owners of one to
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four residential dwellings. In addition, the ingestion of lead-based paint chips
or dust particles by children can result in lead poisoning, and the owner of a
property where such circumstances exist may be held liable for such injuries.
Finally, federal law mandates that detailed worker safety standards must be
complied with where construction, alteration, repair or renovation of structures
that contain lead, or materials that contain lead, is contemplated.
Underground storage tanks ("USTs") are, and in the past have been,
frequently located at properties used for industrial, retail and other business
purposes. Federal law, as well as the laws of most states, currently require
USTs used for the storage of fuel or hazardous substances and waste to meet
certain standards designed to prevent releases from the USTs into the
environment. USTs installed before the implementation of these standards, or
that otherwise do not meet these standards, are potential sources of
contamination to the soil and groundwater. Land owners may be liable for the
costs of investigating and remediating soil and groundwater contamination that
may emanate from leaking USTs.
ENFORCEABILITY OF CERTAIN PROVISIONS
Default Interest; Late Charges; and Prepayment Fees.
Some of the Mortgage Loans may contain provisions requiring the
mortgagor to pay late charges or additional interest if required payments are
not made on time. In certain states there may be limitations upon the
enforceability of these provisions, and no assurance can be given that any of
the provisions related to any Mortgage Loan will be enforceable. Some of the
Mortgage Loans may also contain provisions prohibiting any prepayment of the
loan prior to maturity or requiring the payment of a prepayment fee in
connection with any prepayment. Even if enforceable, a requirement for
prepayment fees may not deter mortgagors from prepaying their Mortgage Loans.
Although certain states will allow the enforcement of these provisions upon a
voluntary prepayment of a mortgage loan, other states may not allow such
provisions after a mortgage loan has been outstanding for a certain number of
years or if enforcement would be unconscionable, or the allowed amount of any
prepayment fee may be limited (that is, 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 there may be limitations upon
the enforceability of prepayment fee provisions applicable in connection with a
default by the mortgagor or an involuntary acceleration of the secured
indebtedness, and no assurance can be given that any of such provisions related
to a mortgage loan will be enforceable under such circumstances. The applicable
laws of certain states may also treat certain prepayment fees as usurious if in
excess of statutory limits. See "Applicability of Usury Laws."
Due-on-Sale Provisions.
The enforceability of due-on-sale provisions has been the subject of
legislation or litigation in many states, and their enforceability has been
limited or denied in some cases, usually involving single family residential
mortgage transactions. Due-on-sale provisions typically provide that: (1) the
Mortgage Loan will (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 (2) the Mortgage Loan may not be assumed without the consent of the related
mortgagee in connection with any sale or other transfer. The Garn-St. Germain
Depository Institutions Act of 1982 (the "Garn-St. Germain Act") preempts state
constitutional, statutory and case law that prohibits due-on-sale clauses. As a
result, due-on-sale clauses have become generally enforceable except in those
states whose legislatures exercised their right to regulate such clauses with
respect to mortgage loans that were: (1) 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 (2) originated by lenders other than national
banks, federal savings institutions or federal credit unions. The Federal Home
Loan Mortgage Corporation 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 of
due-on-sale clauses with respect to certain categories of loans that were
originated or assumed during the "window period" applicable to such state. 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 Pooling and Servicing Agreement for each series generally will
provide that if any Mortgage Loan contains a provision in the nature of a
"Due-on-Sale" clause, then for so long as the Mortgage Loan is included in the
Trust Fund, the Master Servicer or the Special Servicer, if any, on behalf of
the Trustee, will take the actions it deems to be in the best interest of the
Trust Fund in accordance with the servicing standard set forth in the Pooling
and Servicing Agreement, and may waive or enforce any due-on-sale clause
contained in the related Note or Mortgage.
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In addition, under the Bankruptcy Code, 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.
It is expected that the Mortgage Loans will include a
"Debt-Acceleration" clause, which permits the mortgagee to accelerate the full
debt upon a monetary or nonmonetary default of the mortgagor. The courts of all
states will enforce acceleration clauses in the event of a material payment
default if appropriate notices of default have been effectively given. However,
the equity courts of any state may refuse to foreclose a mortgage when an
acceleration of the indebtedness would be inequitable or unjust or the
circumstances would render the acceleration unconscionable. Furthermore, in some
states, the mortgagor may avoid foreclosure and reinstate an accelerated loan by
paying only the defaulted amounts and, in certain states, the costs and
attorneys' fees incurred by the mortgagee in collecting such defaulted payments.
State courts are also known to apply various legal and equitable
principles to avoid enforcement of the forfeiture provisions of Installment
Contracts. For example, a mortgagee's practice of accepting late payments from
the mortgagor 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 Installment Contract following a default. Not infrequently,
if a mortgagor under an Installment Contract has significant equity in the
property, equitable principles will be applied to reform or reinstate the
Installment Contract or to permit the mortgagor 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"), unless a mortgagee obtains a court order to the
contrary, a mortgagor who enters military service after the origination of the
mortgagor's mortgage loan may not be charged interest (including fees and
charges) above an annual rate of 6% during the period of the mortgagor's active
duty status. For purposes of the Relief Act, persons entered into military
service include members of the Army, Navy, Air Force, Marines, Coast Guard,
members of the National Guard or any Reserves who are called to active duty
status after the origination of their mortgage loan, and officers of the U.S.
Public Health Service assigned to duty with the military. Any shortfall in
interest collections resulting from the application of the Relief Act, to the
extent not covered by any applicable Credit Enhancement, could result in losses
to the certificateholders. In addition, the Relief Act imposes limitations that
would impair the ability of the Master Servicer or the Special Servicer, if any,
to foreclose on an affected Mortgage Loan during the mortgagor's period of
active duty status and, under certain circumstances, during an additional three
months thereafter. Thus, if such a Mortgage Loan goes into default, there may be
delays and losses occasioned by the inability to foreclose the Mortgaged
Property in a timely fashion. Because the Relief Act applies to mortgagors who
enter military service (including reservists who are later called to active
duty) after origination of their mortgage loan, no information can be provided
as to the number of Mortgage Loans that may be affected by the Relief Act. The
Relief Act may also be applicable if the mortgagor is an entity owned or
controlled by a person in a military service.
APPLICABILITY OF USURY LAWS
State and federal usury laws limit the interest that mortgagees 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" in the determination of the "interest" charged in connection with a loan.
If 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 type of statute requires the mortgagee to forfeit the interest above
the applicable limit or imposes a specified penalty. For example, the mortgagor
may have the recorded mortgage or deed of trust canceled upon paying its debt
with lawful interest, or the mortgagee may foreclose, but only for the debt plus
lawful interest, in either case, subject to any applicable credit for excessive
interest collected from the mortgagor and any penalty owed by the mortgagee. A
second, more severe type of statute results in the invalidation of the
transaction. Under this second type of statute, the mortgagor may have the
recorded mortgage or deed of trust canceled without any payment and the
mortgagee is prohibited from foreclosing.
Under Title V of the federal Depository Institutions Deregulation and
Monetary Control Act of 1980, as amended ("Title V"), some types of residential
(including multifamily, but not other commercial) first mortgage loans may be
exempted from state usury limitations. However, until April 1, 1983, states were
allowed to adopt laws or constitutional provisions expressly rejecting
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Title V and even where Title V is not so rejected, any state is authorized to
adopt a provision limiting discount points or other charges on mortgage loans
covered by Title V. Some states have rejected Title V and/or taken action to
limit discount points or other charges.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by nonfederally chartered lenders have historically been
subjected to a variety of restrictions. These restrictions differed from state
to state, resulting in difficulties determining whether a particular alternative
mortgage instrument originated by a state-chartered lender was in compliance
with applicable law. These difficulties were alleviated substantially with
respect to residential (including multifamily, but not other commercial)
mortgage loans 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: (1) 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; (2) state-chartered credit unions may
originate alternative mortgage instruments in accordance with regulations
promulgated by the National Credit Union Administration (the "NCUN") with
respect to origination of alternative mortgage instruments by federal credit
unions; and (3) all other nonfederally 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 authorized any state to reject applicability of the provisions of Title
VIII by adopting, before October 15, 1985, a law or constitutional provision
expressly rejecting the applicability of such provisions. Certain states have
taken such action. A mortgagee's failure to comply with the applicable federal
regulations in connection with the origination of an alternative mortgage
instrument could subject such mortgage loan to state restrictions that would not
otherwise be applicable.
LEASES AND RENTS
Some of the Mortgage Loans may be secured by an assignment of leases
and rents, either through assignment provisions incorporated in the mortgage,
through a separate assignment document or both. Under an assignment of leases
and rents, the mortgagor typically assigns to the mortgagee the mortgagor's
right, title and interest as landlord under each lease and the income derived
therefrom, while retaining a right to collect the rents for so long as there is
no default under the mortgage loan documentation. In the event of such a
default, the mortgagee may be entitled to collect rents. However, a mortgagee's
failure to take certain steps to "perfect" its interest in rents may result in
the mortgagee's inability to collect all or a portion of the rents. In order to
"perfect" an interest in rents, some state laws require not only proper
recording of the assignment of leases and rents, but also require the mortgagee
to take possession of the property and/or obtain judicial appointment of a
receiver before the mortgagee is entitled to collect rents. Mortgagees taking
possession of property may incur potentially substantial risks attendant to such
possession, including liability for environmental clean-up costs and other risks
inherent to property ownership and operation. In addition, if a bankruptcy or
similar proceeding is commenced by or in respect of the mortgagor, the
mortgagee's ability to collect the rents may also be adversely affected.
SECONDARY FINANCING; DUE-ON-ENCUMBRANCE PROVISIONS
If a mortgagor encumbers a mortgaged property with one or more junior
liens, the senior mortgagee is subjected to additional risk, such as the
following:
o the mortgagor may have difficulty servicing and repaying multiple
loans and if the junior loan permits recourse to the mortgagor and
the senior loan does not, a mortgagor may be more likely to repay
sums due on the junior loan than those due on the senior loan;
o acts of the senior mortgagee that prejudice the junior mortgagee
or impair the junior mortgagee's security may create a superior
equity in favor of the junior mortgagee (for example, if the
mortgagor and the senior mortgagee agree to an increase in the
principal amount of, or the interest rate payable on, the senior
loan, the senior mortgagee may lose its priority to the extent an
existing junior mortgagee is prejudiced or the mortgagor is
additionally burdened);
o if the mortgagor defaults on the senior loan and/or any junior
loan or loans, the existence of junior loans and actions taken by
junior mortgagees can impair the security available to the senior
mortgagee and can interfere with, delay and in certain
circumstances even prevent the taking of action by the senior
mortgagee; and
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o the bankruptcy of a junior mortgagee may operate to stay
foreclosure or similar proceedings by the senior mortgagee.
Some of the Mortgage Loans may not restrict secondary financing,
thereby permitting the mortgagor to use the Mortgaged Property as security for
one or more additional loans. Some of the Mortgage Loans may contain a
"Due-on-Encumbrance" clause which: (1) provides that the Mortgage Loan will (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 (2) requires the
consent of the related mortgagee to the creation of any the lien or other
encumbrance on the related Mortgaged Property. However, such
"Due-on-Encumbrance" clauses may be unenforceable in some jurisdictions under
certain circumstances.
The Pooling and Servicing Agreement for each series will generally
provide that if any Mortgage Loan contains a "Due-on-Encumbrance" clause, then
for so long as the Mortgage Loan is included in a given Trust Fund, the Master
Servicer, or the Special Servicer (if the Mortgage Loan is a Specially Serviced
Mortgage Loan), will, in a manner consistent with the servicing standard set
forth in the Pooling and Servicing Agreement, exercise (or decline to exercise)
any right it may have as the mortgagee of record with respect to the Mortgage
Loan to (a) accelerate the payments thereon; or (b) withhold its consent to the
creation of any lien or other encumbrance.
TYPE OF MORTGAGED PROPERTY
A mortgagee may be subject to additional risk depending upon the type
and use of the mortgaged property in question. For instance, mortgaged
properties that are hospitals, nursing homes or convalescent homes may present
special risks to mortgagees in large part due to significant governmental
regulation of the ownership, operation, maintenance, control and financing of
health care institutions. Mortgages encumbering mortgaged properties that are
owned by the mortgagor under a condominium form of ownership are subject to the
declaration, by-laws and other rules and regulations of the condominium
association. Mortgaged properties that are hotels or motels may present
additional risk to the mortgagee because (a) hotels and motels are typically
operated pursuant to franchise, management and operating agreements that may be
terminable by the operator, and (b) 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 that are multifamily residential
properties or cooperatively owned multifamily properties may be subject to rent
control laws, which could impact the future cash flows of those properties.
CRIMINAL FORFEITURES
Various federal and state laws (collectively, the "Forfeiture Laws")
provide for the civil or criminal forfeiture of property (including real estate)
used or intended to be used to commit or aid in the commission of illegal acts
or property purchased with the proceeds of such illegal acts. Even though the
Forfeiture Laws were originally intended as tools to fight organized crime and
drug related crimes, there is a current trend toward expanding the scope of such
laws. Some Forfeiture Laws (such as the Racketeer Influenced and Corrupt
Organizations law and the Comprehensive Crime Control Act of 1984) provide for
notice, opportunity to be heard and for certain defenses for "innocent
lienholders." However, given the uncertain scope of the Forfeiture Laws and
their relationship to existing constitutional protections afforded property
owners, no assurance can be made that enforcement of a Forfeiture Law with
respect to any Mortgaged Property would not deprive the Trust Fund of its
security for the related Mortgage Loan.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and
rules promulgated thereunder (collectively, the "ADA"), public accommodations
(such as hotels, restaurants, shopping centers, hospitals, schools and social
service center establishments) must remove structural, architectural and
communication barriers from existing places of public accommodation so that such
modified accommodations are accessible and usable by disabled individuals.
Modifications must be undertaken to the extent "readily achievable." The
"readily achievable" standard takes into account factors including the financial
resources of the affected site, owner, landlord or other applicable person. In
addition to imposing a possible financial burden on the mortgagor in its
capacity as owner or landlord, the ADA may also impose these requirements on a
foreclosing mortgagee who succeeds to the interest of the mortgagor as owner or
landlord. Furthermore, since the "readily achievable" standard may vary
depending on the financial condition of the owner or landlord, a foreclosing
mortgagee who is financially more capable than the mortgagor of complying with
the requirements of the ADA may be subject to more stringent requirements than
those to which the mortgagor is subject.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated material
federal income tax consequences of the purchase, ownership and disposition of
Certificates. This discussion does not address every aspect of the federal
income tax consequences that may be applicable to particular categories of
investors in light of their personal investment circumstances or their special
treatment under the federal income tax rules. The authorities on which this
discussion is based are subject to change or differing interpretations, possibly
retroactively. This discussion reflects the applicable provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), as well as regulations
(the "REMIC Regulations") promulgated by the U.S. Department of Treasury (the
"Treasury"). Potential investors should consult their own tax advisors regarding
the tax treatment of their acquisition, ownership and disposition of
Certificates.
FEDERAL INCOME TAX CONSEQUENCES FOR REMIC CERTIFICATES
General. An election may be made with respect to a particular series of
Certificates, to treat the Trust Fund or one or more segregated pools of assets
therein as one or more REMICs within the meaning of Tax Code Section 860D. A
Trust Fund or portion thereof as to which a REMIC election is made is referred
to as a "REMIC Pool". For purposes of this discussion, Certificates of a series
as to which one or more REMIC elections are made are referred to as "REMIC
Certificates" and will consist of one or more classes of "Regular Certificates"
and one class of "Residual Certificates" for each REMIC Pool. Qualification as a
REMIC requires ongoing compliance with certain conditions. With respect to each
series of REMIC Certificates, O'Melveny & Myers LLP, counsel to the Depositor,
has advised the Depositor that in the firm's opinion, assuming (1) the making of
the REMIC election, (2) compliance with the Pooling and Servicing Agreement and
(3) compliance with any changes in the law, including any amendments to the Tax
Code or applicable Treasury regulations, each REMIC Pool will qualify as a
REMIC. In such case, the Regular Certificates will be considered to be "regular
interests" in the REMIC Pool and generally will be treated for federal income
tax purposes as newly originated debt instruments, and the Residual Certificates
will be considered to be "residual interests" in the REMIC Pool. The prospectus
supplement for each series of Certificates will indicate whether any REMIC
elections will be made with respect to the related Trust Fund, in which event
references to "REMIC" or "REMIC Pool" herein will refer to each REMIC Pool
specified in the applicable prospectus supplement. If so specified in the
applicable prospectus supplement, the portion of a Trust Fund as to which a
REMIC election is not made may be treated as either a financial asset
securitization investment trust (a "FASIT") or as a grantor trust for federal
income tax purposes. See "Federal Income Tax Consequences for FASIT Certificates
and "Federal Income Tax Consequences for Certificates as to Which No REMIC
Election Is Made".
Status of REMIC Certificates. REMIC Certificates held by a domestic
building and loan association will constitute "a regular or residual interest in
a REMIC" within the meaning of Tax Code Section 7701(a)(19)(C)(xi), but only in
the same proportion that the assets of the REMIC Pool would be treated as
"loans...secured by an interest in real property which is...residential real
property" (such as single family or multifamily properties, but not commercial
properties) within the meaning of Tax Code Section 7701(a)(19)(C)(v) or as other
assets described in Tax Code Section 7701(a)(19)(C), and otherwise will not
qualify for REMIC treatment. REMIC Certificates held by a real estate investment
trust will constitute "real estate assets" within the meaning of Tax Code
Section 856(c)(4)(A), and interest on the Regular Certificates and income with
respect to Residual Certificates will be considered "interest on obligations
secured by mortgages on real property or on interests in real property" within
the meaning of Tax Code Section 856(c)(3)(B) in the same proportion that the
assets of the REMIC Pool would be so treated. If at all times 95% or more of the
assets of the REMIC Pool qualify for each of the foregoing treatments, the REMIC
Certificates will qualify for the corresponding status in their entirety. For
purposes of Tax Code Section 856(c)(4)(A), payments of principal and interest on
the Mortgage Loans that are reinvested pending distribution to holders of REMIC
Certificates qualify for REMIC treatment. Where two REMIC Pools are a part of a
tiered structure they will be treated as one REMIC for purposes of the tests
described above respecting asset ownership of more or less than 95%. REMIC
Certificates held by a regulated investment company will not constitute
"Government Securities" within the meaning of Tax Code Section 851(b)(3)(A)(i).
REMIC Certificates held by certain financial institutions will constitute an
"evidence of indebtedness" within the meaning of Tax Code Section 582(c)(1). The
Small Business Job Protection Act of 1996 (the "SBJPA of 1996") repealed the
reserve method for bad debts of domestic building and loan associations and
mutual savings banks, and eliminated the asset category of "qualifying real
property loans" in former Tax Code Section 593(d) for taxable years beginning
after December 31, 1995. The requirement in the SBJPA of 1996 that such
institutions must "recapture" a portion of their existing bad debt reserves is
suspended if a certain portion of their assets are maintained in "residential
loans" under Tax Code Section 7701(a)(19)(C)(v), but only if those loans were
made to acquire, construct or improve the related real property and not for the
purpose of refinancing. No effort will be made to identify the portion of the
Mortgage Loans of any series meeting this requirement, and no representation is
made in this regard.
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Qualification as a REMIC. The REMIC Pool must comply with ongoing
requirements set forth in the Tax Code in order for the REMIC Pool to qualify as
a REMIC. The REMIC Pool must fulfill an asset test, which requires that no more
than a de minimis portion of the assets of the REMIC Pool may consist of assets
other than "qualified mortgages" and "permitted investments", beginning the
close of the third calendar month after the "Startup Day" (which for purposes of
this discussion is the date of issuance of the REMIC Certificates) and at all
times thereafter. The REMIC Regulations provide a safe harbor for the asset test
if at all times the aggregate adjusted basis of the nonqualified assets is less
than 1% of the aggregate adjusted basis of all the REMIC Pool's assets. An
entity that fails to meet the safe harbor may nevertheless demonstrate that it
holds no more than a de minimis amount of nonqualified assets. A REMIC also must
provide "reasonable arrangements" to prevent its residual interest from being
held by "disqualified organizations" and must furnish applicable tax information
to transferors or agents that violate this requirement. The Pooling and
Servicing Agreement for each series will contain a provision designed to meet
this requirement. See "Taxation of Residual Certificates-Tax-Related
Restrictions on Transfer of Residual Certificates-Disqualified Organizations".
A qualified mortgage is any obligation principally secured by an
interest in real property and either transferred to the REMIC Pool on the
Startup Day in exchange for Regular Certificates or Residual Certificates or
purchased by the REMIC Pool within a three-month period thereafter pursuant to a
fixed price contract in effect on the Startup Day. Qualified mortgages include
whole mortgage loans, such as the Mortgage Loans, certificates of beneficial
interest in a grantor trust that holds mortgage loans, regular interests in
another REMIC, loans secured by timeshare interests and loans secured by shares
held by a tenant stockholder in a cooperative housing corporation, provided
that, in general, (1) the fair market value of the real property securing the
mortgage (including buildings and structural components thereof) is at least 80%
of the principal balance of the related Mortgage Loan or underlying mortgage
loan either at origination of the relevant loan or as of the Startup Day (an
original loan-to-value ratio of not more than 125% with respect to the real
property securing the mortgage) or (2) substantially all the proceeds of the
Mortgage Loan or the underlying mortgage loan were used to acquire, improve or
protect an interest in real property that, at the origination date, was the only
security for the Mortgage Loan or underlying mortgage loan. If the Mortgage Loan
has been substantially modified other than in connection with a default or
reasonably foreseeable default, it must meet the loan-to-value test in (1) of
the preceding sentence as of the date of the last such modification or at
closing. A qualified mortgage includes a qualified replacement mortgage, which
is any property that would have been treated as a qualified mortgage if it were
transferred to the REMIC Pool on the Startup Day and that is received either (a)
in exchange for any qualified mortgage within a three-month period thereafter or
(b) in exchange for a "defective obligation" within a two-year period
thereafter. A "defective obligation" includes (i) a mortgage in default or as to
which default is reasonably foreseeable, (ii) a mortgage as to which a customary
representation or warranty made at the time of transfer to the REMIC Pool has
been breached, (iii) a mortgage that was fraudulently procured by the mortgagor,
and (iv) a mortgage that was not in fact principally secured by real property
(but only if such mortgage is disposed of within 90 days of discovery). A
Mortgage Loan that is "defective" as described in clause (iv) that is not sold
or, if within two years of the Startup Day, exchanged, within 90 days of
discovery, ceases to be a qualified mortgage after the 90-day period. A
qualified mortgage also includes any regular interest in a FASIT transferred to
the REMIC Pool on the Startup Day in exchange for Regular Certificates or
Residual Certificates, or purchased by the REMIC Pool within three months after
the Startup Day pursuant to a fixed price contract in effect on the Startup Day,
provided that at least 95% of the value of the FASIT assets is at all times
attributable to obligations principally secured by interests in real property
and which are transferred to or purchased by a REMIC as provided in this
sentence.
Permitted investments include cash flow investments, qualified reserve
assets, and foreclosure property. A cash flow investment is an investment,
earning a return in the nature of interest, of amounts received on or with
respect to qualified mortgages for a temporary period, not exceeding 13 months,
until distributed to holders of interests in the REMIC Pool. A qualified reserve
asset is any intangible property (other than a REMIC residual interest) held for
investment that is part of any reasonably required reserve maintained by the
REMIC Pool to provide for payments of expenses of the REMIC Pool or amounts due
on the regular or residual interests in the event of defaults (including
delinquencies) on the qualified mortgages, lower than expected reinvestment
returns, prepayment interest shortfalls and certain other contingencies. The
reserve fund will be disqualified if more than 30% of the gross income from the
assets in the reserve fund for the year is derived from the sale or other
disposition of property held for less than three months, unless required to
prevent a default on the regular interests caused by a default on one or more
qualified mortgages. A reserve fund must be reduced "promptly and appropriately"
as payments on the Mortgage Loans are received. Foreclosure property is real
property acquired by the REMIC Pool in connection with the default or imminent
default of a qualified mortgage and generally held beyond the close of the third
calendar year following the acquisition of the property by REMIC Pool for not
more than two years, with possible extensions granted by the Internal Revenue
Service (the "Service") of up to an additional four years.
In addition to the foregoing requirements, the various interests in a
REMIC Pool also must meet certain requirements. All of the interests in a REMIC
Pool must be either: (1) one or more classes of regular interests or (2) a
single class of residual
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interests on which distributions are made pro rata. A regular interest is an
interest in a REMIC Pool that is issued on the Startup Day with fixed terms, is
designated as a regular interest, unconditionally entitles the holder to receive
a specified principal amount (or other similar amount), and provides that
interest payments (or other similar amounts), if any, at or before maturity
either are payable based on a fixed rate or a qualified variable rate, or
consist of a specified, nonvarying portion of the interest payments on qualified
mortgages. The specified principal amount may consist of a fixed number of basis
points, a fixed percentage of the total interest, or a fixed or qualified
variable or inverse variable rate on some or all of the qualified mortgages
minus a different fixed or qualified variable rate. The specified principal
amount of a regular interest that provides for interest payments consisting of a
specified, nonvarying portion of interest payments on qualified mortgages may be
zero. A residual interest is an interest in a REMIC Pool other than a regular
interest that is issued on the Startup Day and that is designated as a residual
interest. An interest in a REMIC Pool may be treated as a regular interest even
if payments of principal with respect to such interest are subordinated to
payments on other regular interests or the residual interest in the REMIC Pool,
and are dependent on the absence of defaults or delinquencies on qualified
mortgages or permitted investments, lower than reasonably expected returns on
permitted investments, unanticipated expenses incurred by the REMIC Pool or
prepayment interest shortfalls. Accordingly, the Regular Certificates of a
series will constitute one or more classes of regular interests, and the
Residual Certificates with respect to that series will constitute a single class
of residual interests on which distributions are made pro rata.
If an entity, such as the REMIC Pool, fails to comply with one or more
of the ongoing requirements of the Tax Code for REMIC status during any taxable
year, the Tax Code provides that the entity will not be treated as a REMIC for
that year and thereafter. In this event, an entity with multiple classes of
ownership interests may be treated as a separate association taxable as a
corporation under Treasury regulations, and the Regular Certificates may be
treated as equity interests therein. The Tax Code, however, authorizes the
Treasury Department to issue regulations that address situations where failure
to meet one or more of the requirements for REMIC status occurs inadvertently
and in good faith, and disqualification of the REMIC Pool would occur absent
regulatory relief. Investors should be aware, however, that the Conference
Committee Report to the Tax Reform Act of 1986 (the "1986 Act") indicates that
the relief may be accompanied by sanctions, such as the imposition of a
corporate tax on all or a portion of the REMIC Pool's income for the period of
time in which the requirements for REMIC status are not satisfied.
TAXATION OF REGULAR CERTIFICATES
GENERAL
In general, interest, original issue discount and market discount on a
Regular Certificate will be treated as ordinary income to a holder of the
Regular Certificate (the "Regular Certificateholder") as they accrue, and
principal payments on a Regular Certificate will be treated as a return of
capital to the extent of the Regular Certificateholder's basis in the Regular
Certificate. Regular Certificateholders must use the accrual method of
accounting with regard to Regular Certificates, regardless of the method of
accounting otherwise used by such Regular Certificateholders.
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ORIGINAL ISSUE DISCOUNT
Certificates on which interest is not paid currently ("Compound
Interest Certificates") will be, and other classes of Regular Certificates may
be, issued with "original issue discount" within the meaning of Tax Code Section
1273(a). Holders of any class of Regular Certificates having original issue
discount generally must include original issue discount in ordinary income for
federal income tax purposes as it accrues, in accordance with the constant yield
method that takes into account the compounding of interest in advance of receipt
of the cash attributable to such income. The following discussion is based in
part on temporary and final Treasury regulations issued on February 2, 1994, as
amended on June 14, 1996, (the "OID Regulations") under Tax Code Sections 1271
through 1273 and 1275 and in part on the provisions of the 1986 Act. Regular
Certificateholders should be aware that the OID Regulations do not adequately
address certain issues relevant to prepayable securities, such as the Regular
Certificates, and to the extent these issues are not addressed in the
regulations, the Depositor intends to apply the methodology described in the
Conference Committee Report to the 1986 Act. No assurance can be provided that
the Service will not take a different position as to those matters not currently
addressed by the OID Regulations. Moreover, the OID Regulations include an
anti-abuse rule allowing the Service to apply or depart from the OID Regulations
where necessary or appropriate to ensure a reasonable tax result in light of the
applicable statutory provisions. A tax result will not be considered
unreasonable under the anti-abuse rule in the absence of a substantial effect on
the present value of a taxpayer's tax liability. Investors are advised to
consult their own tax advisors regarding the appropriate method for reporting
interest and original issue discount with respect to the Regular Certificates.
Each Regular Certificate will be treated as a single installment
obligation for purposes of determining the original issue discount includible in
a Regular Certificateholder's income. The total amount of original issue
discount on a Regular Certificate is the excess of the "stated redemption price
at maturity" of the Regular Certificate over its "issue price". The issue price
of a class of Regular Certificates offered pursuant to this Prospectus generally
is the first price at which a substantial amount of Regular Certificates of that
class is sold to the public (excluding bond houses, brokers and underwriters).
The Depositor intends to treat the issue price of a class as to which there is
no substantial sale as of the issue date or that is retained by the Depositor as
the fair market value of that class as of the issue date, although the situation
is unclear under the OID Regulations. The issue price of a Regular Certificate
also includes the amount paid by an initial Regular Certificateholder for
accrued interest that relates to a period prior to the issue date of the Regular
Certificate, unless the Regular Certificateholder elects on its federal income
tax return to exclude that amount from the issue price and to recover it on the
first Distribution Date. The stated redemption price at maturity of a Regular
Certificate always includes the original principal amount of the Regular
Certificate, but generally will not include distributions of stated interest if
the interest distributions constitute "qualified stated interest". Under the OID
Regulations, qualified stated interest generally means interest payable at a
single fixed rate or a qualified variable rate (as described below) provided
that the interest payments are unconditionally payable at intervals of one year
or less during the entire term of the Regular Certificate. It is possible that
no interest on any class of Regular Certificates will be treated as qualified
stated interest, because there is no penalty or default remedy in the case of
nonpayment of interest with respect to a Regular Certificate. However, except as
provided below or in the applicable prospectus supplement, because the
underlying Mortgage Loans provide for remedies in the event of default, the
Depositor intends to treat interest with respect to the Regular Certificates as
qualified stated interest. Distributions of interest on a Compound Interest
Certificate, or on other Regular Certificates with respect to which deferred
interest will accrue, will not constitute qualified stated interest, in which
case the stated redemption price at maturity of such Regular Certificates
includes all distributions of interest as well as principal thereon. Likewise,
the Depositor intends to treat an "interest only" class, or a class on which
interest is substantially disproportionate to its principal amount (a so-called
"super-premium" class) as having no qualified stated interest. In instances
where the interval between the issue date and the first Distribution Date on a
Regular Certificate is shorter than the interval between subsequent Distribution
Dates, the interest attributable to the additional days will be included in the
stated redemption price at maturity.
Under a de minimis rule, original issue discount on a Regular
Certificate will be considered to be zero if the original issue discount is less
than 0.25% of the stated redemption price at maturity of the Regular Certificate
multiplied by the weighted average maturity of the Regular Certificate. For this
purpose, the weighted average maturity of the Regular Certificate is computed as
the sum of the amounts determined by multiplying the number of full years (i.e.,
rounding down partial years) from the issue date until all distributions in
reduction of [principal] are scheduled to be made by a fraction, the numerator
of which is the amount of each distribution included in the stated redemption
price at maturity of the Regular Certificate and the denominator of which is the
stated redemption price at maturity of the Regular Certificate. The Conference
Committee Report to the 1986 Act provides that the schedule of such
distributions should be determined in accordance with the assumed rate of
prepayment of the Mortgage Loans (the "Prepayment Assumption") and the
anticipated reinvestment rate, if any, relating to the Regular Certificates. The
Prepayment Assumption with respect to a series of Regular Certificates will be
set forth in the related prospectus supplement. Holders generally must report de
minimis original issue discount pro rata as principal payments are received, and
such income will be
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capital gain if the Regular Certificate is held as a capital asset. However,
under the OID Regulations, Regular Certificateholders may elect to accrue all de
minimis original issue discount as well as market discount and market premium
under the constant yield method. For more information, you should refer to the
section in this prospectus titled "Election to Treat All Interest Under the
Constant Yield Method."
A Regular Certificateholder generally must include in gross income for
any taxable year the sum of the "daily portions," as defined below, of the
original issue discount on the Regular Certificate accrued during an accrual
period for each day on which it holds the Regular Certificate, including the
date of purchase but excluding the date of disposition. The Depositor will treat
the monthly period ending on the day before each Distribution Date as the
accrual period. With respect to each Regular Certificate, a calculation will be
made of the original issue discount that accrues during each successive full
accrual period (or shorter period from the date of original issue) that ends on
the day before the related Distribution Date on the Regular Certificate. The
Conference Committee Report to the 1986 Act states that the rate of accrual of
original issue discount is intended to be based on the Prepayment Assumption.
The original issue discount accruing in a full accrual period would be the
excess, if any, of (1) the sum of (a) the present value of all of the remaining
distributions to be made on the Regular Certificate as of the end of that
accrual period that are included in the Regular Certificate's stated redemption
price at maturity and (b) the distributions made on the Regular Certificate
during the accrual period that are included in the Regular Certificate's stated
redemption price at maturity, over (2) the adjusted issue price of the Regular
Certificate at the beginning of the accrual period. The present value of the
remaining distributions referred to in the preceding sentence is calculated
based on (1) the yield to maturity of the Regular Certificate at the issue date,
(2) events (including actual prepayments) that have occurred prior to the end of
the accrual period and (3) the Prepayment Assumption. For these purposes, the
adjusted issue price of a Regular Certificate at the beginning of any accrual
period equals the issue price of the Regular Certificate, increased by the
aggregate amount of original issue discount with respect to the Regular
Certificate that accrued in all prior accrual periods and reduced by the amount
of distributions included in the Regular Certificate's stated redemption price
at maturity that were made on the Regular Certificate in such prior periods. The
original issue discount accruing during any accrual period (as determined in
this paragraph) will then be divided by the number of days in the period to
determine the daily portion of original issue discount for each day in the
period. With respect to an initial accrual period shorter than a full accrual
period, the daily portions of original issue discount must be determined
according to an appropriate allocation under any reasonable method.
Under the method described above, the daily portions of original issue
discount required to be included in income by a Regular Certificateholder
generally will increase to take into account prepayments on the Regular
Certificates as a result of prepayments on the Mortgage Loans that exceed the
Prepayment Assumption, and generally will decrease (but not below zero for any
period) if the prepayments are slower than the Prepayment Assumption. An
increase in prepayments on the Mortgage Loans with respect to a series of
Regular Certificates can result in both a change in the priority of principal
payments with respect to certain classes of Regular Certificates and either an
increase or decrease in the daily portions of original issue discount with
respect to the Regular Certificates.
ACQUISITION PREMIUM
A purchaser of a Regular Certificate at a price greater than its
adjusted issue price but less than its stated redemption price at maturity will
be required to include in gross income the daily portions of the original issue
discount on the Regular Certificate reduced pro rata by a fraction, the
numerator of which is the excess of its purchase price over its adjusted issue
price and the denominator of which is the excess of the remaining stated
redemption price at maturity over the adjusted issue price. Alternatively a
subsequent purchaser may elect to treat all acquisition premium under the
constant yield method, as described below under the heading "Election to Treat
All Interest Under the Constant Yield Method".
VARIABLE RATE REGULAR CERTIFICATES
Regular Certificates may provide for interest based on a variable rate.
Under the OID Regulations, interest is treated as payable at a variable rate if,
generally, (1) the issue price does not exceed the original principal balance by
more than a specified de minimis amount and (2) the interest compounds or is
payable at least annually at current values of (a) one or more "qualified
floating rates", (b) a single fixed rate and one or more qualified floating
rates, (c) a single "objective rate", or (d) a single fixed rate and a single
objective rate that is a "qualified inverse floating rate". A floating rate is a
qualified floating rate if variations in the rate can reasonably be expected to
measure contemporaneous variations in the cost of newly borrowed funds, or where
the rate is subject to a fixed multiple that is greater than 0.65, but not more
than 1.35. The rate may also be increased or decreased by a fixed spread or
subject to a fixed cap or floor, or a cap or floor that is not reasonably
expected as of the issue date to affect the yield of the instrument
significantly. Two or more qualified floating rates will be treated as a single
qualified floating rate if all the
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qualified floating rates can reasonably be expected to have approximately the
same values throughout the terms of the instrument. This requirement will be
conclusively presumed to be satisfied if the values of the qualified floating
rates are within 0.25% of each other on the issue date. An objective rate (other
than a qualified floating rate) is a rate that is determined using a single
fixed formula and that is based on objective financial or economic information,
provided that the information is not (1) within the control of the issuer or a
related party or (2) unique to the circumstances of the issuer or a related
party. A qualified inverse floating rate is an objective rate that is equal to a
fixed rate minus a qualified floating rate that inversely reflects
contemporaneous variations in the cost of newly borrowed funds; an inverse
floating rate that is not a qualified floating rate may nevertheless be an
objective rate. A class of Regular Certificates may be issued that does not have
a variable rate under the OID Regulations, for example, a class that bears
different rates at different times during the period it is outstanding to the
extent that it is considered significantly "front-loaded" or "back-loaded"
within the meaning of the OID Regulations. It is possible that such a class may
be considered to bear "contingent interest" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of contingent
interest, are by their terms not applicable to Regular Certificates. However, if
final regulations dealing with contingent interest with respect to Regular
Certificates apply the same principles as the OID Regulations, they may lead to
different timing of income inclusion than would be the case under the OID
Regulations. Furthermore, application of such principles could lead to the
characterization of gain on the sale of contingent interest Regular Certificates
as ordinary income. Investors should consult their tax advisors regarding the
appropriate treatment of any Regular Certificate that does not pay interest at a
fixed rate or variable rate as described in this paragraph.
Under the REMIC Regulations, a Regular Certificate qualifies as a
regular interest in a REMIC if: (1) it bears a rate that qualifies as a variable
rate under the OID Regulations that is tied to current values of a variable rate
(or the highest, lowest or average of two or more variable rates), including a
rate based on the average cost of funds of one or more financial institutions,
or a positive or negative multiple of such a rate (plus or minus a specified
number of basis points), or that represents a weighted average of rates on some
or all of the Mortgage Loans which bear interest at a fixed rate or at a
qualifying variable rate under the REMIC Regulations, including such a rate that
is subject to one or more caps or floors, or (2) it bears one or more qualifying
variable rates for one or more periods or one or more fixed rates for one or
more periods, and a different variable rate or fixed rate for other periods.
Accordingly, unless otherwise indicated in the applicable prospectus supplement,
the Depositor intends to treat Regular Certificates that qualify as regular
interests under this rule in the same manner as obligations bearing a variable
rate for original issue discount reporting purposes.
The amount of original issue discount with respect to a Regular
Certificate bearing a variable rate of interest will accrue in the manner
described above under "Original Issue Discount" with the yield to maturity and
future payments on the Regular Certificate generally to be determined by
assuming that interest will be payable for the life of the Regular Certificate
based on the initial rate (or, if different, the value of the applicable
variable rate as of the pricing date) for the relevant class. Unless otherwise
specified in the applicable prospectus supplement, the Depositor intends to
treat such variable interest as qualified stated interest, other than variable
interest on an interest-only or super-premium class, which will be treated as
non-qualified stated interest includible in the stated redemption price at
maturity. Ordinary income reportable for any period will be adjusted based on
subsequent changes in the applicable interest rate index.
Although unclear under the OID Regulations, unless required otherwise
by applicable final regulations, the Depositor intends to treat Regular
Certificates bearing an interest rate that is a weighted average of the net
interest rates on Mortgage Loans or Mortgage Certificates having fixed or
adjustable rates, as having qualified stated interest, except to the extent that
initial "teaser" rates cause sufficiently "back-loaded" interest to create more
than de minimis original issue discount. The yield on such Regular Certificates
for purposes of accruing original issue discount will be a hypothetical fixed
rate based on the fixed rates, in the case of fixed rate Mortgage Loans, and
initial "teaser rates" followed by fully indexed rates, in the case of
adjustable rate Mortgage Loans. In the case of adjustable rate Mortgage Loans,
the applicable index used to compute interest on the Mortgage Loans in effect on
the pricing date (or possibly the issue date) will be deemed to be in effect
beginning with the period in which the first weighted average adjustment date
occurring after the issue date occurs. Adjustments will be made in each accrual
period either increasing or decreasing the amount of ordinary income reportable
to reflect the actual Pass-Through Rate on the Regular Certificates.
DEFERRED INTEREST
Under the OID Regulations, all interest on a Regular Certificate as to
which there may be deferred interest is includible in the stated redemption
price at maturity thereof. Accordingly, any deferred interest that accrues with
respect to a class of Regular Certificates may constitute income to the holders
of those Regular Certificates prior to the time distributions of cash for
deferred interest are made.
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MARKET DISCOUNT
A purchaser of a Regular Certificate may be subject to the market
discount rules of Tax Code Section 1276 through 1278. Under these Tax Code
sections and the principles applied by the OID Regulations in the context of
original issue discount, "market discount" is the amount by which the
purchaser's original basis in the Regular Certificate (1) is exceeded by the
then-current principal amount of the Regular Certificate or (2) in the case of a
Regular Certificate having original issue discount, is exceeded by the adjusted
issue price of that Regular Certificate at the time of purchase. The purchaser
generally will be required to recognize ordinary income to the extent of accrued
market discount on the Regular Certificate as distributions includible in the
stated redemption price at maturity thereof are received, in an amount not
exceeding any distribution. The market discount would accrue in a manner to be
provided in Treasury regulations and should take into account the Prepayment
Assumption. The Conference Committee Report to the 1986 Act provides that until
regulations are issued, market discount would accrue either (1) on the basis of
a constant interest rate or (2) in the ratio of stated interest allocable to the
relevant period to the sum of the interest for such period plus the remaining
interest as of the end of such period, or in the case of a Regular Certificate
issued with original issue discount, in the ratio of original issue discount
accrued for the relevant period to the sum of the original issue discount
accrued for such period plus the remaining original issue discount as of the end
of such period. The purchaser generally will be required to treat a portion of
any gain on a sale or exchange of the Regular Certificate as ordinary income to
the extent of the market discount accrued to the date of disposition under one
of the foregoing methods, less any accrued market discount previously reported
as ordinary income as partial distributions in reduction of the stated
redemption price at maturity were received. The purchaser will be required to
defer deduction of a portion of the excess of the interest paid or accrued on
indebtedness incurred to purchase or carry a Regular Certificate over the
interest distributable thereon. The deferred portion of interest expense in any
taxable year generally will not exceed the accrued market discount on the
Regular Certificate for that year. Any deferred interest expense is, in general,
allowed as a deduction not later than the year in which the related market
discount income is recognized or the Regular Certificate is disposed of. As an
alternative to the inclusion of market discount in income on the foregoing
basis, the Regular Certificateholder may elect to include market discount in
income currently as it accrues on all market discount instruments acquired by
such Regular Certificateholder in that taxable year or thereafter, in which case
the interest deferral rule will not apply. See "Election to Treat All Interest
Under the Constant Yield Method" below regarding an alternative manner in which
such election may be deemed to be made.
Market discount with respect to a Regular Certificate will be
considered to be zero if the market discount is less than 0.25% of the remaining
stated redemption price at maturity of the Regular Certificate multiplied by the
weighted average maturity of the Regular Certificate (determined as described
above in the third paragraph under "Original Issue Discount") remaining after
the date of purchase. De minimis market discount apparently should be reported
in a manner similar to de minimis original issue discount. Treasury regulations
implementing the market discount rules have not yet been issued, and therefore
investors should consult their own tax advisors regarding the application of
these rules. Investors should also consult Revenue Procedure 92-67 concerning
the elections to include market discount in income currently and to accrue
market discount on the basis of the constant yield method.
PREMIUM
A Regular Certificate purchased at a cost greater than its remaining
stated redemption price at maturity generally is considered to be purchased at a
premium. If the Regular Certificateholder holds such Regular Certificate as a
"capital asset" within the meaning of Tax Code Section 1221, the Regular
Certificateholder may elect under Tax Code Section 171 to amortize the premium
under the constant yield method. The Conference Committee Report to the 1986 Act
indicates a Congressional intent that the same rules that will apply to the
accrual of market discount on installment obligations will also apply to
amortizing bond premium under Tax Code Section 171 on installment obligations
such as the Regular Certificates, although it is unclear whether the
alternatives to the constant yield method described above under "Market
Discount" are available. Amortizable bond premium will be treated as an offset
to interest income on a Regular Certificate rather than as a separate deduction
item. See "Election to Treat All Interest Under the Constant Yield Method" below
regarding an alternative manner in which the Tax Code Section 171 election may
be deemed to be made.
ELECTION TO TREAT ALL INTEREST UNDER THE CONSTANT YIELD METHOD
A holder of a debt instrument such as a Regular Certificate may elect
to treat all interest that accrues on the instrument using the constant yield
method, with none of the interest being treated as qualified stated interest.
For purposes of applying the constant yield method to a debt instrument subject
to such an election, (1) "interest" includes stated interest, original issue
discount, de minimis original issue discount, market discount and de minimis
market discount, as adjusted by any amortizable
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bond premium or acquisition premium and (2) the debt instrument is treated as if
the instrument were issued on the holder's acquisition date in the amount of the
holder's adjusted basis immediately after acquisition. It is unclear whether,
for this purpose, the initial Prepayment Assumption would continue to apply or
if a new prepayment assumption as of the date of the holder's acquisition would
apply. A holder generally may make a constant yield method election on an
instrument by instrument basis or for a class or group of debt instruments.
However, if the holder makes such an election with respect to a debt instrument
with amortizable bond premium or with market discount, the holder is deemed to
have made elections to amortize bond premium or to report market discount income
currently as it accrues under the constant yield method, respectively, for all
debt instruments acquired by the holder in the same taxable year or thereafter.
The election is made on the holder's federal income tax return for the year in
which the debt instrument is acquired and is irrevocable except with the
approval of the Service. Investors should consult their own tax advisors
regarding the advisability of making such an election.
SALE OR EXCHANGE OF REGULAR CERTIFICATES
If a Regular Certificateholder sells or exchanges a Regular
Certificate, the Regular Certificateholder will recognize gain or loss equal to
the difference, if any, between the amount received and its adjusted basis in
the Regular Certificate. The adjusted basis of a Regular Certificate generally
will equal the cost of the Regular Certificate to the seller, increased by any
original issue discount or market discount previously included in the seller's
gross income with respect to the Regular Certificate and reduced by amounts
included in the stated redemption price at maturity of the Regular Certificate
that were previously received by the seller, by any amortized premium and by
previously recognized losses.
Except as described above with respect to market discount, and except
as provided in this paragraph, any gain or loss on the sale or exchange of a
Regular Certificate realized by an investor who holds the Regular Certificate as
a capital asset will be capital gain or loss and will be long-term or short-term
depending on whether the Regular Certificate has been held for the long-term
capital gain holding period (currently more than one year). Any gain will be
treated as ordinary income (1) if a Regular Certificate is held as part of a
"conversion transaction" as defined in Tax Code Section 1258(c), up to the
amount of interest that would have accrued on the Regular Certificateholder's
net investment in the conversion transaction at 120% of the appropriate
applicable Federal rate under Tax Code Section 1274(d) in effect at the time the
taxpayer entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior distribution of property that was held
as a part of such transaction, (2) in the case of a non-corporate taxpayer, to
the extent the taxpayer has made an election under Tax Code Section 163(d)(4) to
have net capital gains taxed as investment income at ordinary rates, or (3) to
the extent that the gain does not exceed the excess, if any, of (a) the amount
that would have been includible in the gross income of the holder if its yield
on the Regular Certificate were 110% of the applicable Federal rate as of the
date of purchase, over (b) the amount of income actually includible in the gross
income of such holder with respect to the Regular Certificate. In addition, gain
or loss recognized from the sale of a Regular Certificate by certain banks or
thrift institutions will be treated as ordinary income or loss pursuant to Tax
Code Section 582(c). Capital gains of certain non-corporate taxpayers are
subject to a lower maximum tax rate (28%) than ordinary income of such taxpayers
(39.6%), and still a lower maximum rate (20%) for property held for more than 18
months. The maximum tax rate for corporations is the same with respect to both
ordinary income and capital gains.
TREATMENT OF LOSSES
Holders of Regular Certificates will be required to report income with
respect to Regular Certificates on the accrual method of accounting, without
giving effect to delays or reductions in distributions attributable to defaults
or delinquencies on the Mortgage Loans allocable to a particular class of
Regular Certificates, except to the extent it can be established that such
losses are uncollectible. Accordingly, the holder of a Regular Certificate may
have income, or may incur a diminution in cash flow as a result of a default or
delinquency, but may not be able to take a deduction (subject to the discussion
below) for the corresponding loss until a subsequent taxable year. In this
regard, investors are cautioned that while they may generally cease to accrue
interest income if it reasonably appears that the interest will be
uncollectible, the Internal Revenue Service may take the position that original
issue discount must continue to be accrued in spite of its uncollectibility
until the debt instrument is disposed of in a taxable transaction or becomes
worthless in accordance with the rules of Tax Code Section 166. To the extent
the rules of Tax Code Section 166 regarding bad debts are applicable, it appears
that holders of Regular Certificates that are corporations or that otherwise
hold the Regular Certificates in connection with a trade or business should in
general be allowed to deduct as an ordinary loss any loss sustained during the
taxable year on account of any Regular Certificates becoming wholly or partially
worthless, and that, in general, holders of Regular Certificates that are not
corporations and do not hold the Regular Certificates in connection with a trade
or business will be allowed to deduct as a short-term capital loss any loss with
respect to principal sustained during the taxable year on account of a portion
of any class or subclass of the Regular Certificates becoming wholly worthless.
Although the matter is not free from doubt, non-corporate holders of Regular
Certificates should be allowed a bad debt
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deduction at the time the principal balance of any class or subclass of the
Regular Certificates is reduced to reflect losses resulting from any liquidated
Mortgage Loans. The Service, however, could take the position that non-corporate
holders would be allowed a bad debt deduction to reflect losses only after all
Mortgage Loans remaining in the Trust Fund have been liquidated or the class of
Regular Certificates has been otherwise retired. The Service could also assert
that losses on the Regular Certificates are deductible based on some other
method that may defer such deductions for all holders, such as reducing future
cash flow for purposes of computing original issue discount. This may have the
effect of creating "negative" original issue discount which would be deductible
only against future positive original issue discount or otherwise upon
termination of the class. Holders of Regular Certificates are urged to consult
their own tax advisors regarding the appropriate timing, amount and character of
any loss sustained with respect to such Regular Certificates. While losses
attributable to interest previously reported as income should be deductible as
ordinary losses by both corporate and non-corporate holders, the Internal
Revenue Service may take the position that losses attributable to accrued
original issue discount may only be deducted as short-term capital losses by
non-corporate holders not engaged in a trade or business. Special loss rules are
applicable to banks and thrift institutions, including rules regarding reserves
for bad debts. Investors are advised to consult their tax advisors regarding the
treatment of losses on Regular Certificates.
TAXATION OF RESIDUAL CERTIFICATES
TAXATION OF REMIC INCOME
Generally, the "daily portions" of REMIC taxable income or net loss
will be includible as ordinary income or loss in determining the federal taxable
income of holders of Residual Certificates ("Residual Certificateholders"), and
will not be taxed separately to the REMIC Pool. The daily portions of REMIC
taxable income or net loss of a Residual Certificateholder are determined by
allocating the REMIC Pool's taxable income or net loss for each calendar quarter
ratably to each day in that quarter and by allocating the daily portion among
the Residual Certificateholders in proportion to their holdings of Residual
Certificates in the REMIC Pool on that day. REMIC taxable income is generally
determined in the same manner as the taxable income of an individual using the
accrual method of accounting, except that (1) the limitations on deductibility
of investment interest expense and expenses for the production of income do not
apply, (2) all bad loans will be deductible as business bad debts and (3) the
limitation on the deductibility of interest and expenses related to tax-exempt
income will apply. The REMIC Pool's gross income includes interest, original
issue discount income and market discount income, if any, on the Mortgage Loans,
reduced by amortization of any premium on the Mortgage Loans, plus income from
amortization of issue premium, if any, on the Regular Certificates, plus income
on reinvestment of cash flows and reserve assets, plus any cancellation of
indebtedness income upon allocation of realized losses to the Regular
Certificates. The REMIC Pool's deductions include interest and original issue
discount expense on the Regular Certificates, servicing fees on the Mortgage
Loans, other administrative expenses of the REMIC Pool and realized losses on
the Mortgage Loans. The requirement that Residual Certificateholders report
their pro rata share of taxable income or net loss of the REMIC Pool will
continue until there are no Certificates of any class of the related series
outstanding.
The taxable income recognized by a Residual Certificateholder in any
taxable year will be affected by, among other factors, the relationship between
the timing of recognition of interest and original issue discount or market
discount income or amortization of premium with respect to the Mortgage Loans,
on the one hand, and the timing of deductions for interest (including original
issue discount) on the Regular Certificates or income from amortization of issue
premium on the Regular Certificates, on the other hand. If an interest in the
Mortgage Loans is acquired by the REMIC Pool at a discount, and one or more of
the Mortgage Loans is prepaid, the Residual Certificateholder may recognize
taxable income without being entitled to receive a corresponding amount of cash
because (1) the prepayment may be used in whole or in part to make distributions
in reduction of principal on the Regular Certificates and (2) the discount on
the Mortgage Loans which is includible in income may exceed the deduction
allowed upon distributions on those Regular Certificates on account of any
unaccrued original issue discount relating to those Regular Certificates. When
there is more than one class of Regular Certificates that distribute principal
sequentially, this mismatching of income and deductions is particularly likely
to occur in the early years following issuance of the Regular Certificates when
distributions in reduction of principal are being made in respect of earlier
classes of Regular Certificates to the extent that such classes are not issued
with substantial discount. If taxable income attributable to such a mismatching
is realized, in general, losses would be allowed in later years as distributions
on the later classes of Regular Certificates are made. Taxable income may also
be greater in earlier years than in later years as a result of the fact that
interest expense deductions, expressed as a percentage of the outstanding
principal amount of such a series of Regular Certificates, may increase over
time as distributions in reduction of principal are made on the lower yielding
classes of Regular Certificates, whereas to the extent that the REMIC Pool
includes fixed rate Mortgage Loans, interest income with respect to any given
Mortgage Loan will remain constant over time as a percentage of the outstanding
principal amount of that loan. Consequently, Residual Certificateholders must
have sufficient other sources of cash to pay any federal, state or local income
taxes due as a result of such mismatching or unrelated deductions against which
to offset such income, subject to the discussion of "excess inclusions" below
under "-Limitations on Offset or Exemption of
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REMIC Income." The timing of such mismatching of income and deductions described
in this paragraph, if present with respect to a series of Certificates, may have
a significant adverse effect upon the Residual Certificateholder's after-tax
rate of return. In addition, a Residual Certificateholder's taxable income
during certain periods may exceed the income reflected by such Residual
Certificateholder for such periods in accordance with generally accepted
accounting principles. Investors should consult their own accountants concerning
the accounting treatment of their investment in Residual Certificates.
BASIS AND LOSSES
The amount of any net loss of the REMIC Pool that may be taken into
account by the Residual Certificateholder is limited to the adjusted basis of
the Residual Certificate as of the close of the quarter (or time of disposition
of the Residual Certificate if earlier), determined without taking into account
the net loss for the quarter. The initial adjusted basis of a purchaser of a
Residual Certificate is the amount paid for the Residual Certificate. The
adjusted basis will be increased by the amount of taxable income of the REMIC
Pool reportable by the Residual Certificateholder and will be decreased (but not
below zero), first, by a cash distribution from the REMIC Pool and, second, by
the amount of loss of the REMIC Pool reportable by the Residual
Certificateholder. Any loss that is disallowed on account of this limitation may
be carried over indefinitely with respect to the Residual Certificateholder as
to whom the loss was disallowed and may be used by the Residual
Certificateholder only to offset any income generated by the same REMIC Pool.
A Residual Certificateholder will not be permitted to amortize directly
the cost of its Residual Certificate as an offset to its share of the taxable
income of the related REMIC Pool. However, taxable income will not include cash
received by the REMIC Pool that represents a recovery of the REMIC Pool's basis
in its assets. A recovery of basis by the REMIC Pool will have the effect of
amortization of the issue price of the Residual Certificates over their life.
However, in view of the possible acceleration of the income of Residual
Certificateholders described above under "Taxation of REMIC Income", the period
of time over which the issue price is effectively amortized may be longer than
the economic life of the Residual Certificates.
A Residual Certificate may have a negative value if the net present
value of anticipated tax liabilities exceeds the present value of anticipated
cash flows. The REMIC Regulations appear to treat the issue price of a residual
interest as zero rather than a negative amount for purposes of determining the
REMIC Pool's basis in its assets. The preamble to the REMIC Regulations states
that the Service may provide future guidance on the proper tax treatment of
payments made by a transferor of such a residual interest to induce the
transferee to acquire the interest, and Residual Certificateholders should
consult their own tax advisors in this regard.
To the extent the initial adjusted basis of a Residual
Certificateholder (other than an original holder) in the Residual Certificate is
greater that the corresponding portion of the REMIC Pool's basis in the Mortgage
Loans, the Residual Certificateholder will not recover a portion of his basis
until termination of the REMIC Pool (unless future Treasury regulations are
revised to provide for periodic adjustments to the REMIC income otherwise
reportable by that holder). For more information, you should refer to the
following sections in this prospectus titled "Treatment of Certain Items of
REMIC Income and Expense-Market Discount" regarding the basis of Mortgage Loans
to the REMIC Pool and "-Sale or Exchange of a Residual Certificate" regarding
possible treatment of a loss upon termination of the REMIC Pool as a capital
loss.
TREATMENT OF CERTAIN ITEMS OF REMIC INCOME AND EXPENSE
Although the Depositor intends to compute REMIC income and expense in
accordance with the Tax Code and applicable regulations, the authorities
regarding the determination of specific items of income and expense are subject
to differing interpretations. The Depositor makes no representation as to the
specific method it will use for reporting income with respect to the Mortgage
Loans and expenses with respect to the Regular Certificates, and different
methods could result in different timing of reporting of taxable income or net
loss to Residual Certificateholders or differences in capital gain versus
ordinary income.
Original Issue Discount and Premium. Generally, the REMIC Pool's
deductions for original issue discount and income from amortization of issue
premium will be determined in the same manner as original issue discount income
on Regular Certificates as described above under "Taxation of Regular
Certificates-Original Issue Discount" and "-Variable Rate Regular Certificates,"
without regard to the de minimis rule described therein, and "-Acquisition
Premium."
Deferred Interest. Any deferred interest that accrues with respect to
any adjustable rate Mortgage Loans held by the REMIC Pool will constitute income
to the REMIC Pool and will be treated in a manner similar to the deferred
interest that accrues with respect to Regular Certificates as described above
under "Taxation of Regular Certificates-Deferred Interest".
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Market Discount. The REMIC Pool will have market discount income in
respect of Mortgage Loans if, in general, the basis of the REMIC Pool allocable
to the Mortgage Loans is exceeded by their unpaid principal balances. The REMIC
Pool's basis in Mortgage Loans is the fair market value of the Mortgage Loans,
based on the aggregate of the issue prices (or the fair market value of retained
Classes) of the regular and residual interests in the REMIC Pool immediately
after the transfer thereof to the REMIC Pool. In respect of Mortgage Loans that
have market discount to which Tax Code Section 1276 applies, the accrued portion
of market discount would be recognized currently as an item of ordinary income
in a manner similar to original issue discount. Market discount income generally
should accrue in the manner described above under "Taxation of Regular
Certificates-Market Discount".
Premium. Generally, if the basis of the REMIC Pool in the Mortgage
Loans exceeds the unpaid principal balances thereof, the REMIC Pool will be
considered to have acquired the Mortgage Loans at a premium equal to the amount
of any excess. In a manner analogous to the discussion above under "Taxation of
Regular Certificates-Premium", a REMIC Pool that holds a Mortgage Loan as a
capital asset under Tax Code Section 1221 may elect under Tax Code Section 171
to amortize premium on whole mortgage loans or mortgage loans underlying
mortgage backed securities ("MBS") that were originated after September 27, 1985
or MBS that are REMIC regular interests under the constant yield method.
Amortizable bond premium will be treated as an offset to interest income on the
Mortgage Loans, rather than as a separate deduction item. To the extent that the
mortgagors with respect to these Mortgage Loans are individuals, Tax Code
Section 171 will not be available for premium on Mortgage Loans (including
underlying mortgage loans) originated on or before September 27, 1985. Premium
with respect to these Mortgage Loans may be deductible in accordance with a
reasonable method regularly employed by the holder thereof. The allocation of
this premium pro rata among principal payments should be considered a reasonable
method; however, the Service may argue that the premium should be allocated in a
different manner, such as allocating it entirely to the final payment of
principal.
LIMITATIONS ON OFFSET OR EXEMPTION OF REMIC INCOME
A portion or all of the REMIC taxable income includible in determining
the federal income tax liability of a Residual Certificateholder will be subject
to special treatment. That portion, referred to as the "excess inclusion", is
equal to the excess of REMIC taxable income for the calendar quarter allocable
to a Residual Certificate over the daily accruals for that quarterly period of
(1) 120% of the long-term applicable Federal rate that would have applied to the
Residual Certificate (if it were a debt instrument) on the Startup Day under Tax
Code Section 1274(d), multiplied by (2) the adjusted issue price of such
Residual Certificate at the beginning of such quarterly period. For this
purpose, the adjusted issue price of a Residual Certificate at the beginning of
a quarter is the issue price of the Residual Certificate, plus the amount of
daily accruals of REMIC income described in this paragraph for all prior
quarters, decreased by any distributions made with respect to the Residual
Certificate prior to the beginning of the quarterly period. Accordingly, the
portion of the REMIC Pool's taxable income that will be treated as excess
inclusions will be a larger portion of income as the adjusted issue price of the
Residual Certificates diminishes.
The portion of a Residual Certificateholder's REMIC taxable income
consisting of the excess inclusions generally may not be offset by other
deductions, including net operating loss carry forwards, on the Residual
Certificateholder's return. However, net operating loss carryovers are
determined without regard to excess inclusion income. Further, if the Residual
Certificateholder is an organization subject to the tax on unrelated business
income imposed by Tax Code Section 511, the Residual Certificateholder's excess
inclusions will be treated as unrelated business taxable income of the Residual
Certificateholder for purposes of Tax Code Section 511. In addition, REMIC
taxable income is subject to 30% withholding tax with respect to certain persons
who are not U.S. Persons (as defined below under "Tax-Related Restrictions on
Transfer of Residual Certificates-Foreign Investors"), and the portion thereof
attributable to excess inclusions is not eligible for any reduction in the rate
of withholding tax (by treaty or otherwise). See "Taxation of Certain Foreign
Investors-Residual Certificates" below. Finally, if a real estate investment
trust or a regulated investment company owns a Residual Certificate, a portion
(allocated under Treasury regulations yet to be issued) of dividends paid by the
real estate investment trust or a regulated investment company could not be
offset by net operating losses of its shareholders, would constitute unrelated
business taxable income for tax-exempt shareholders, and would be ineligible for
reduction of withholding to certain persons who are not U.S. Persons. The SBJPA
of 1996 has eliminated the special rule permitting Section 593 institutions
("thrift institutions") to use net operating losses and other allowable
deductions to offset their excess inclusion income from Residual Certificates
that have "significant value" within the meaning of the REMIC Regulations,
effective for taxable years beginning after December 31, 1995, except with
respect to Residual Certificates continuously held by thrift institutions since
November 1, 1995.
In addition, the SBJPA of 1996 provides three rules for determining the
effect of excess inclusions on the alternative minimum taxable income of a
Residual Certificateholder. First, alternative minimum taxable income for a
Residual Certificateholder is determined without regard to the special rule,
discussed above, that taxable income cannot be less than excess
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inclusions. Second, a Residual Certificateholder's alternative minimum taxable
income for a taxable year cannot be less than the excess inclusions for the
year. Third, the amount of any alternative minimum tax net operating loss
deduction must be computed without regard to any excess inclusions. These rules
are effective for taxable years beginning after December 31, 1996, unless a
Residual Certificateholder elects to have such rules apply only to taxable years
beginning after August 20, 1996.
TAX-RELATED RESTRICTIONS ON TRANSFER OF RESIDUAL CERTIFICATES
Disqualified Organizations. If any legal or beneficial interest in a
Residual Certificate is transferred to a Disqualified Organization (as defined
below) other than in connection with the formation of a REMIC Pool and the
Disqualified Organization sells the Residual Certificate within seven days after
the Startup Day pursuant to a bonding contract, a tax would be imposed in an
amount equal to the product of (x) the present value of the total anticipated
excess inclusions with respect to the Residual Certificate for periods after the
transfer and (y) the highest marginal federal income tax rate applicable to
corporations. The REMIC Regulations provide that the anticipated excess
inclusions are based on actual prepayment experience to the date of the transfer
and projected payments based on the Prepayment Assumption. The present value
rate equals the applicable Federal rate under Tax Code Section 1274(d) as of the
date of the transfer for a term ending with the last calendar quarter excess
inclusions are expected to accrue. This tax generally would be imposed on the
transferor of the Residual Certificate, except where the transfer is through an
agent (including a broker, nominee or other middleman) for a Disqualified
Organization, the tax would instead be imposed on the agent. However, a
transferor of a Residual Certificate would in no event be liable for tax with
respect to a transfer if the transferee furnishes to the transferor an affidavit
that the transferee is not a Disqualified Organization and, as of the time of
the transfer, the transferor does not have actual knowledge that the affidavit
is false. The tax also may be waived by the Treasury Department if the
Disqualified Organization promptly disposes of the residual interest and the
transferor pays income tax at the highest corporate rate on the excess
inclusions for the period the Residual Certificate is actually held by the
Disqualified Organization.
In addition, if a "Pass-Through Entity" (as defined below) has excess
inclusion income with respect to a Residual Certificate during a taxable year
and a Disqualified Organization is the record holder of an equity interest in
the entity, then a tax is imposed on the Pass-Through Entity equal to the
product of (x) the amount of excess inclusions on the Residual Certificate that
are allocable to the interest in the Pass-Through Entity during the period the
interest is held by the Disqualified Organization, and (y) the highest marginal
federal corporate income tax rate. This tax would be deductible from the
ordinary gross income of the Pass-Through Entity for the taxable year. The
Pass-Through Entity would not be liable for such tax if it has received an
affidavit from the record holder that it is not a Disqualified Organization or
stating such holder's taxpayer identification number and, during the period that
person is the record holder of the Residual Certificate, the Pass-Through Entity
does not have actual knowledge that the affidavit is false.
For these purposes, (1) "Disqualified Organization" means the United
States, any state or political subdivision thereof, any foreign government, any
international organization, any agency or instrumentality of any of the
foregoing (not including an instrumentality if all of its activities are subject
to tax and, except in the case of the Federal Home Loan Mortgage Corporation, a
majority of its board of directors is not selected by any such governmental
entity), any cooperative organization furnishing electric energy or providing
telephone service to persons in rural areas as described in Tax Code Section
1381(a)(2)(C), and any organization (other than a farmers' cooperative described
in Tax Code Section 521) that is exempt from taxation under the Tax Code unless
such organization is subject to the tax on unrelated business income imposed by
Tax Code Section 511, and (2) "Pass-Through Entity" means any regulated
investment company, real estate investment trust, common trust fund,
partnership, trust or estate and certain corporations operating on a cooperative
basis. Except as may be provided in Treasury regulations, any person holding an
interest in a Pass-Through Entity as a nominee for another will, with respect to
that interest, be treated as a Pass-Through Entity.
The Pooling and Servicing Agreement with respect to a series of
Certificates will provide that no legal or beneficial interest in a Residual
Certificate may be transferred unless (1) the proposed transferee provides to
the transferor and the Trustee an affidavit providing its taxpayer
identification number and stating that it is the beneficial owner of the
Residual Certificate, is not a Disqualified Organization and is not purchasing
the Residual Certificates on behalf of a Disqualified Organization (i.e., as a
broker, nominee or middleman thereof), and (2) the transferor provides a
statement in writing to the Depositor and the Trustee that it has no actual
knowledge that the affidavit is false. Moreover, the Pooling and Servicing
Agreement will provide that any attempted or purported transfer in violation of
these transfer restrictions will be null and void and will vest no rights in any
purported transferee. Each Residual Certificate with respect to a series will
bear a legend referring to these restrictions on transfer, and each Residual
Certificateholder will be deemed to have agreed, as a condition of ownership
thereof, to any amendments to the related Pooling and Servicing Agreement
required under the Tax Code or applicable Treasury regulations to effectuate the
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foregoing restrictions. Information necessary to compute an applicable excise
tax must be furnished to the Service and to the requesting party within 60 days
of the request, and the Depositor or the Trustee may charge a fee for computing
and providing such information.
Noneconomic Residual Interests. Under the REMIC Regulations, a transfer
of a "noneconomic residual interest" (as defined below) to a Residual
Certificateholder (other than a Residual Certificateholder who is not a U.S.
Person, as defined below under "Foreign Investors") is disregarded for all
federal income tax purposes if a significant purpose of the transferor is to
impede the assessment or collection of tax, and the transferor would continue to
be treated as the owner of the Residual Certificates and thus would continue to
be subject to tax on its allocable portion of the net income of the REMIC Pool.
A residual interest in a REMIC (including a residual interest with a positive
value at issuance) is a "noneconomic residual interest" unless, at the time of
the transfer, (1) the present value of the expected future distributions on the
residual interest at least equals the product of the present value of the
anticipated excess inclusions and the highest corporate income tax rate in
effect for the year in which the transfer occurs, and (2) the transferor
reasonably expects that the transferee will receive distributions from the REMIC
at or after he time at which taxes accrue on the anticipated excess inclusions
in an amount sufficient to satisfy the accrued taxes. The anticipated excess
inclusions and the present value rate are determined in the same manner
discussed above under "Disqualified Organizations". The REMIC Regulations
explain that a significant purpose to impede the assessment or collection of tax
exists if the transferor, at the time of the transfer, either knew or should
have known that the transferee would be unwilling or unable to pay taxes due on
its share of the taxable income of the REMIC. A safe harbor is provided if (1)
the transferor conducted, at the time of the transfer, a reasonable
investigation of the financial condition of the transferee and found that the
transferee historically had paid its debts as they came due and found no
significant evidence to indicate that the transferee would not continue to pay
its debts as they came due in the future, and (2) the transferee represents to
the transferor that it understands that, as the holder of the noneconomic
residual interest, the transferee may incur tax liabilities in excess of cash
flows generated by the interest and that the transferee intends to pay taxes
associated with holding the residual interest as they become due. The Pooling
and Servicing Agreement with respect to each series of Certificates will require
the transferee of a Residual Certificate to certify to the matters in the
preceding sentence as part of the affidavit described above under the heading
"Disqualified Organizations". The transferor must have no actual knowledge or
reason to know that such statements are false.
Foreign Investors. The REMIC Regulations provide that the transfer of a
Residual Certificate that has "tax avoidance potential" to a "foreign person"
will be disregarded for all federal tax purposes. This rule appears intended to
apply to a transferee who is not a "U.S. Person" (as defined below), unless the
transferee's income is effectively connected with the conduct of a trade or
business within the United States or not otherwise subject to a withholding tax.
A Residual Certificate is deemed to have tax avoidance potential unless, at the
time of the transfer, (1) the future value of expected distributions equals at
least 30% of the anticipated excess inclusions after the transfer, and (2) the
transferor reasonably expects that the transferee will receive sufficient
distributions from the REMIC Pool at or after the time at which the excess
inclusions accrue and prior to the end of the next succeeding taxable year for
the accumulated withholding tax liability to be paid. If the non-U.S. Person
transfers the Residual Certificate back to a U.S. Person, the transfer will be
disregarded and the foreign transferor will continue to be treated as the owner
unless arrangements are made so that the transfer does not have the effect of
allowing the transferor to avoid tax on accrued excess inclusions.
The prospectus supplement relating to a series of Certificates may
provide that a Residual Certificate may not be purchased by or transferred to
any person that is not a U.S. Person or may describe the circumstances and
restrictions pursuant to which such a transfer may be made. The term "U.S.
Person" means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any State, an estate that is subject to United States federal
income tax regardless of the source of its income or a trust if (a) for taxable
years beginning after December 31, 1996 (or for taxable years ending after
August 20, 1996, if the trustee has made an applicable election), a court within
the United States is able to exercise primary supervision over the
administration of such trust, and one or more United States persons have the
authority to control all substantial decisions of such trust, or (b) for all
other taxable years, such trust is subject to United States federal income tax
regardless of the source of its income (or, to the extent provided in applicable
Treasury Regulations, certain trusts in existence on August 20, 1996 which are
eligible to elect to be treated as U.S. Persons).
SALE OR EXCHANGE OF A RESIDUAL CERTIFICATE
Upon the sale or exchange of a Residual Certificate, the Residual
Certificateholder will recognize gain or loss equal to the difference, if any,
between the amount received and its adjusted basis in the Residual Certificate
(as described above under "Taxation of Residual Certificates-Basis and Losses")
at the time of the sale or exchange. In addition to reporting the taxable income
of the REMIC Pool, a Residual Certificateholder will have taxable income to the
extent that any cash distribution to it from
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the REMIC Pool exceeds its adjusted basis on that Distribution Date. This income
will be treated as gain from the sale or exchange of the Residual Certificate.
It is possible that the termination of the REMIC Pool may be treated as a sale
or exchange of a Residual Certificateholder's Residual Certificate, in which
case, if the Residual Certificateholder has an adjusted basis in its Residual
Certificate remaining when its interest in the REMIC Pool terminates, and if the
Residual Certificateholder holds the Residual Certificate as a capital asset
under Tax Code Section 1221, then the Residual Certificateholder will recognize
a capital loss at that time in the amount of the remaining adjusted basis.
Any gain on the sale of a Residual Certificate will be treated as
ordinary income (1) if a Residual Certificate is held as part of a "conversion
transaction" as defined in Tax Code Section 1258(c), up to the amount of
interest that would have accrued on the Residual Certificateholder's net
investment in the conversion transaction at 120% of the appropriate applicable
Federal rate in effect at the time the taxpayer entered into the transaction
minus any amount previously treated as ordinary income with respect to any prior
disposition of property that was held as a part of such transaction or (2) in
the case of a non-corporate taxpayer, to the extent the taxpayer has made an
election under Tax Code Section 163(d)(4) to have net capital gains taxed as
investment income at ordinary income rates. In addition, gain or loss recognized
from the sale of a Residual Certificate by certain banks or thrift institutions
will be treated as ordinary income or loss pursuant to Tax Code Section 582(c).
The Conference Committee Report to the 1986 Act provides that, except
as provided in Treasury regulations yet to be issued, the wash sale rules of Tax
Code Section 1091 will apply to dispositions of Residual Certificates where the
seller of the Residual Certificate, during the period beginning six months
before the sale or disposition of the Residual Certificate and ending six months
after the sale or disposition, acquires (or enters into any other transaction
that results in the application of Section 1091) any residual interest in any
REMIC or any interest in a "taxable mortgage pool" (such as a non-REMIC owner
trust) that is economically comparable to a Residual Certificate.
MARK TO MARKET REGULATIONS
The Service has issued regulations (the "Mark to Market Regulations")
under Tax Code Section 475 relating to the requirement that a securities dealer
mark to market securities held for sale to customers. This mark-to-market
requirement applies to all securities of a dealer, except to the extent that the
dealer has specifically identified a security as held for investment. The Mark
to Market Regulations provide that, for purposes of this mark-to-market
requirement, a Residual Certificate is not treated as a security and thus may
not be marked to market. The Mark to Market Regulations apply to all Residual
Certificates acquired on or after January 4, 1995.
TAXES THAT MAY BE IMPOSED ON THE REMIC POOL
PROHIBITED TRANSACTIONS
Income from certain transactions by the REMIC Pool, called prohibited
transactions, will not be part of the calculation of income or loss includible
in the federal income tax returns of Residual Certificateholders, but rather
will be taxed directly to the REMIC Pool at a 100% rate. Prohibited transactions
generally include (1) the disposition of a qualified mortgage other than
pursuant to a (a) substitution within two years of the Startup Day for a
defective (including a defaulted) obligation (or repurchase in lieu of
substitution of a defective (including a defaulted) obligation at any time) or
for any qualified mortgage within three months of the Startup Day, (b)
foreclosure, default or imminent default of a qualified mortgage, (c) bankruptcy
or insolvency of the REMIC Pool or (d) qualified (complete) liquidation, (2) the
receipt of income from assets that are not the type of mortgages or investments
that the REMIC Pool is permitted to hold, (3) the receipt of compensation for
services or (4) the receipt of gain from disposition of cash flow investments
other than pursuant to a qualified liquidation. Notwithstanding (1) and (4), it
is not a prohibited transaction to sell REMIC Pool property to prevent a default
on Regular Certificates as a result of a default on qualified mortgages or to
facilitate a clean-up call (generally, an optional termination to save
administrative costs when no more than a small percentage of the Certificates is
outstanding). The REMIC Regulations indicate that the modification of a Mortgage
Loan generally will not be treated as a disposition if it is occasioned by a
default or reasonably foreseeable default, an assumption of the Mortgage Loan,
the waiver of a due-on-sale or due-on-encumbrance clause or the conversion of an
interest rate by a mortgagor pursuant to the terms of a convertible adjustable
rate Mortgage Loan.
CONTRIBUTIONS TO THE REMIC POOL AFTER THE STARTUP DAY
In general, the REMIC Pool will be subject to a tax at a 100% rate on
the value of any property contributed to the REMIC Pool after the Startup Day.
Exceptions are provided for cash contributions to the REMIC Pool (1) during the
three
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months following the Startup Day, (2) made to a qualified reserve fund by
a Residual Certificateholder, (3) in the nature of a guarantee, (4) made to
facilitate a qualified liquidation or clean-up call and (5) as otherwise
permitted in Treasury regulations yet to be issued.
NET INCOME FROM FORECLOSURE PROPERTY
The REMIC Pool will be subject to federal income tax at the highest
corporate rate on "net income from foreclosure property", determined by
reference to the rules applicable to real estate investment trusts. Generally,
property acquired by deed in lieu of foreclosure would be treated as
"foreclosure property" for a period of two years, with possible extensions of up
to an additional four years. Net income from foreclosure property generally
means gain from the sale of a foreclosure property that is inventory property
and gross income from foreclosure property other than qualifying rents and other
qualifying income for a real estate investment trust.
It is not anticipated that the REMIC Pool will receive income or
contributions subject to tax under the preceding three paragraphs, except as
described in the applicable prospectus supplement with respect to net income
from foreclosure property on a commercial or multifamily residential property
that secured a Mortgage Loan. In addition, unless otherwise disclosed in the
applicable prospectus supplement, it is not anticipated that any material state
income or franchise tax will be imposed on a REMIC Pool.
LIQUIDATION OF THE REMIC POOL
If a REMIC Pool adopts a plan of complete liquidation, within the
meaning of Tax Code Section 860F(a)(4)(A)(i), which may be accomplished by
designating in the REMIC Pool's final tax return a date on which such adoption
is deemed to occur, and sells all of its assets (other than cash) within a
90-day period beginning on the date of the adoption of the plan of liquidation,
the REMIC Pool will not be subject to the prohibited transaction rules on the
sale of its assets, provided that the REMIC Pool credits or distributes in
liquidation all of the sale proceeds plus its cash (other than amounts retained
to meet claims) to holders of Regular Certificates and Residual
Certificateholders within the 90-day period.
ADMINISTRATIVE MATTERS
The REMIC Pool will be required to maintain its books on a calendar
year basis and to file federal income tax returns for federal income tax
purposes in a manner similar to a partnership on Form 1066, U.S. Real Estate
Mortgage Investment Conduit Income Tax Return. The Trustee will be required to
sign the REMIC Pool's returns. Treasury regulations provide that, except where
there is a single Residual Certificateholder for an entire taxable year, the
REMIC Pool will be subject to the procedural and administrative rules of the Tax
Code applicable to partnerships, including the determination by the Service of
any adjustments to, among other things, items of REMIC income, gain, loss,
deduction or credit in a unified administrative proceeding. The Residual
Certificateholder owning the largest percentage interest in the Residual
Certificates will be obligated to act as "tax matters person", as defined in
applicable Treasury regulations, with respect to the REMIC Pool. Each Residual
Certificateholder will be deemed, by acceptance of such Residual Certificates,
to have agreed to the appointment of the tax matters person as provided in the
preceding sentence and to the irrevocable designation of the Master Servicer as
agent for performing the functions of the tax matters person.
LIMITATIONS ON DEDUCTION OF CERTAIN EXPENSES
An investor who is an individual, estate or trust will be subject to
limitation with respect to certain itemized deductions described in Tax Code
Section 67, to the extent that such itemized deductions, in the aggregate, do
not exceed 2% of the investor's adjusted gross income. In addition, Tax Code
Section 68 provides that itemized deductions otherwise allowable for a taxable
year of an individual taxpayer will be reduced by the lesser of (1) 3% of the
excess, if any, of adjusted gross income over $124,500 for the taxable year
beginning in 1998 ($62,250 in the case of a married individual filing a separate
return) (subject to adjustments for inflation in subsequent years) or (2) 80% of
the amount of itemized deductions otherwise allowable for such year. In the case
of a REMIC Pool, itemized deductions may include deductions under Tax Code
Section 212 for the servicing fee and all administrative and other expenses
relating to the REMIC Pool, or any similar expenses allocated to the REMIC Pool
with respect to a regular interest it holds in another REMIC. Investors who hold
REMIC Certificates either directly or indirectly through certain pass-through
entities may have their pro rata share of such expenses allocated to them as
additional gross income, but may be subject to a limitation on deductions. In
addition, such expenses are not deductible for purposes of computing the
alternative minimum tax, and may cause investors subject to the alternative
minimum tax to be subject to significant additional tax liability.
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Temporary Treasury regulations provide that the additional gross income and
corresponding amount of expenses generally are to be allocated entirely to the
holders of Residual Certificates in the case of a REMIC Pool that would not
qualify as a fixed investment trust in the absence of a REMIC election. However,
the additional gross income and limitation on deductions will apply to the
allocable portion of such expenses to holders of Regular Certificates, as well
as holders of Residual Certificates, where Regular Certificates are issued in a
manner that is similar to pass-through certificates in a fixed investment trust.
In general, such allocable portion will be determined based on the ratio that a
REMIC Certificateholder's income, determined on a daily basis, bears to the
income of all holders of Regular Certificates and Residual Certificates with
respect to a REMIC Pool. As a result, individuals, estates or trusts holding
REMIC Certificates (either directly or indirectly through a grantor trust,
partnership, S corporation, REMIC, or certain other pass-through entities
described in the foregoing temporary Treasury regulations) may have taxable
income in excess of the interest income at the pass-through rate on Regular
Certificates that are issued in a single class or otherwise consistently with
fixed investment trust status or in excess of cash distributions for the related
period on Residual Certificates. Unless otherwise indicated in the applicable
prospectus supplement, the expenses described in this paragraph will be
allocable to the Residual Certificates.
TAXATION OF CERTAIN FOREIGN INVESTORS
REGULAR CERTIFICATES
Interest, including original issue discount, distributable to Regular
Certificateholders who are non-resident aliens, foreign corporations, or other
Non-U.S. Persons (as defined below), will be considered "portfolio interest" and
generally will not be subject to 30% United States withholding tax, provided
that such Non-U.S. Person (1) is not a "10-percent shareholder" within the
meaning of Tax Code Section 871(h)(3)(B) or a controlled foreign corporation
described in Tax Code Section 881(c)(3)(C) and (2) provides the Trustee, or the
person who would otherwise be required to withhold tax from such distributions
under Tax Code Section 1441 or 1442, with an appropriate statement, signed under
penalties of perjury, identifying the beneficial owner and stating, among other
things, that the beneficial owner of the Regular Certificate is a Non-U.S.
Person. If this statement, or any other required statement, is not provided, 30%
withholding will apply unless reduced or eliminated pursuant to an applicable
tax treaty or unless the interest on the Regular Certificate is effectively
connected with the conduct of a trade or business within the United States by
the Non-U.S. Person. In the latter case, the Non-U.S. Person will be subject to
United States federal income tax at regular rates. Prepayment Premiums
distributable to Regular Certificateholders who are Non-U.S. Persons may be
subject to 30% United States withholding tax. Investors who are Non-U.S. Persons
should consult their own tax advisors regarding the specific tax consequences to
them of owning a Regular Certificate. The term "Non-U.S. Person" means any
person who is not a U.S. Person.
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RESIDUAL CERTIFICATES
The Conference Committee Report to the 1986 Act indicates that amounts
paid to Residual Certificateholders who are Non-U.S. Persons are treated as
interest for purposes of the 30% (or lower treaty rate) United States
withholding tax. Treasury regulations provide that amounts distributed to
Residual Certificateholders may qualify as "portfolio interest", subject to the
conditions described in "Regular Certificates" above, but only to the extent
that (1) the Mortgage Loans (including mortgage loans underlying MBS) were
issued after July 18, 1984 and (2) the Trust Fund or segregated pool of assets
therein (as to which a separate REMIC election will be made), to which the
Residual Certificate relates, consists of obligations issued in "registered
form" within the meaning of Tax Code Section 163(f)(1). Generally, whole
mortgage loans will not be, but MBS and regular interests in another REMIC Pool
will be, considered obligations issued in registered form. Furthermore, a
Residual Certificateholder will not be entitled to any exemption from the 30%
withholding tax (or lower treaty rate) to the extent of that portion of REMIC
taxable income that constitutes an "excess inclusion". See "Taxation of Residual
Certificates-Limitations on Offset or Exemption of REMIC Income". If the amounts
paid to Residual Certificateholders who are Non-U.S. Persons are effectively
connected with the conduct of a trade or business within the United States by
such Non-U.S. Persons, 30% (or lower treaty rate) withholding will not apply.
Instead, the amounts paid to such Non-U.S. Persons will be subject to United
States federal income tax at regular rates. If 30% (or lower treaty rate)
withholding is applicable, these amounts generally will be taken into account
for purposes of withholding only when paid or otherwise distributed (or when the
Residual Certificate is disposed of) under rules similar to withholding upon
disposition of debt instruments that have original issue discount. See
"Tax-Related Restrictions on Transfer of Residual Certificates-Foreign
Investors" above concerning the disregard of certain transfers having "tax
avoidance potential". Investors who are Non-U.S. Persons should consult their
own tax advisors regarding this specific tax consequences of owning Residual
Certificates.
BACKUP WITHHOLDING
Distributions made on the Regular Certificates, and proceeds from the
sale of the Regular Certificates to or through certain brokers, may be subject
to a "backup" withholding tax under Tax Code Section 3406 of 31% on "reportable
payments" (including interest distributions, original issue discount, and, under
certain circumstances, principal distributions) unless the Regular
Certificateholder complies with certain reporting and/or certification
procedures, including the provision of its taxpayer identification number to the
Trustee, its agent or the broker who effected the sale of the Regular
Certificate, or the Certificateholder is otherwise an exempt recipient under
applicable provisions of the Tax Code. Any amounts to be withheld from
distribution on the Regular Certificates would be refunded by the Service or
allowed as a credit against the Regular Certificateholder's federal income tax
liability.
REPORTING REQUIREMENTS
Reports of accrued interest, original issue discount and information
necessary to compute the accrual of any market discount on the Regular
Certificates will be made annually to the Service and to individuals, estates,
non-exempt and non-charitable trusts, and partnerships who are either holders of
record of Regular Certificates or beneficial owners who own Regular Certificates
through a broker or middleman as nominee. All brokers, nominees and other
non-exempt holders of record of Regular Certificates (including corporations,
non-calendar year taxpayers, securities or commodities dealers, real estate
investment trusts, investment companies, common trust funds, thrift institutions
and charitable trusts) may request such information for any calendar quarter by
telephone or in writing by contacting the person designated in Service
Publication 938 with respect to a particular series of Regular Certificates.
Holders through nominees must request such information from the nominee.
The Service's Form 1066 has an accompanying Schedule Q, Quarterly
Notice to Residual Interest Holders of REMIC Taxable Income or Net Loss
Allocation. Treasury regulations require that Schedule Q be furnished by the
REMIC Pool to each Residual Certificateholder by the end of the month following
the close of each calendar quarter (41 days after the end of a quarter under
proposed Treasury regulations) in which the REMIC Pool is in existence.
Treasury regulations require that, in addition to the foregoing
requirements, information must be furnished quarterly to Residual
Certificateholders, furnished annually, if applicable, to holders of Regular
Certificates, and filed annually with the Service concerning Tax Code Section 67
expenses (see "Limitations on Deduction of Certain Expenses" above) allocable to
such holders. Furthermore, under such regulations, information must be furnished
quarterly to Residual Certificateholders, furnished annually to holders of
Regular Certificates, and filed annually with the Service concerning the
percentage of the REMIC Pool's assets meeting the qualified asset tests
described above under "Status of REMIC Certificates".
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FEDERAL INCOME TAX CONSEQUENCES FOR CERTIFICATES AS TO WHICH NO REMIC ELECTION
IS MADE
STANDARD CERTIFICATES
GENERAL
If no election is made to treat a Trust Fund (or a segregated pool of
assets therein) with respect to a series of Certificates that are not designated
as "Stripped Certificates", as described below, as a REMIC (Certificates of such
a series hereinafter referred to as "Standard Certificates"), the Trust Fund
will be classified as a grantor trust under subpart E, Part 1 of subchapter J of
the Tax Code and not as an association taxable as a corporation or a "taxable
mortgage pool" within the meaning of Tax Code Section 7701(i). Where there is no
fixed retained yield with respect to the Mortgage Loans underlying the Standard
Certificates, the holder of each Standard Certificate (a "Standard
Certificateholder") in the series will be treated as the owner of a pro rata
undivided interest in the ordinary income and corpus portions of the Trust Fund
represented by its Standard Certificate and will be considered the beneficial
owner of a pro rata undivided interest in each of the Mortgage Loans, subject to
the discussion below under "Recharacterization of Servicing Fees". Accordingly,
the holder of a Standard Certificate of a particular series will be required to
report on its federal income tax return its pro rata share of the entire income
from the Mortgage Loans represented by its Standard Certificate, including
interest at the coupon rate on the Mortgage Loans, original issue discount (if
any), prepayment fees, assumption fees, and late payment charges received by the
Master Servicer, in accordance with the Standard Certificateholder's method of
accounting. A Standard Certificateholder generally will be able to deduct its
share of the servicing fee and all administrative and other expenses of the
Trust Fund in accordance with its method of accounting, provided that the
amounts are reasonable compensation for services rendered to that Trust Fund.
However, investors who are individuals, estates or trusts who own Standard
Certificates, either directly or indirectly through certain pass-through
entities, will be subject to limitation with respect to certain itemized
deductions described in Tax Code Section 67, including deductions under Tax Code
Section 212 for the servicing fee and all the administrative and other expenses
of the Trust Fund, to the extent that the deductions, in the aggregate, do not
exceed two percent of an investor's adjusted gross income. In addition, Tax Code
Section 68 provides that itemized deductions otherwise allowable for a taxable
year of an individual taxpayer will be reduced by the lesser of (1) 3% of the
excess, if any, of adjusted gross income over $124,500 for the taxable year
beginning in 1998 ($62,250 in the case of a married individual filing a separate
return) (subject to adjustments for inflation in subsequent years), or (2) 80%
of the amount of itemized deductions otherwise allowable for such year. As a
result, such investors holding Standard Certificates, directly or indirectly
through a pass-through entity, may have aggregate taxable income in excess of
the aggregate amount of cash received on such Standard Certificates with respect
to interest at the pass-through rate on such Standard Certificates. In addition,
these expenses are not deductible at all for purposes of computing the
alternative minimum tax, and may cause investors subject to the alternative
minimum tax to be subject to significant additional tax liability. Moreover,
where there is fixed retained yield with respect to the Mortgage Loans
underlying a series of Standard Certificates or where the servicing fee is in
excess of reasonable servicing compensation, the transaction will be subject to
the application of the "stripped bond" and "stripped coupon" rules of the Tax
Code, as described below under "Stripped Certificates" and "Recharacterization
of Servicing Fees", respectively.
TAX STATUS
Standard Certificates will have the following status for federal income
tax purposes:
1. A Standard Certificate owned by a "domestic building and loan
association" within the meaning of Tax Code Section 7701(a)(19)
will be considered to represent "loans...secured by an interest in
real property which is...residential real property" within the
meaning of Tax Code Section 7701(a)(19)(C)(v), provided that the
real property securing the Mortgage Loans represented by that
Standard Certificate is of the type described in that section of
the Tax Code.
2. A Standard Certificate owned by a real estate investment trust
will be considered to represent "real estate assets" within the
meaning of Tax Code Section 856(c)(4)(A) to the extent that the
assets of the related Trust Fund consist of qualified assets, and
interest income on such assets will be considered "interest on
obligations secured by mortgages on real property" to such extent
within the meaning of Tax Code Section 856(c)(3)(B).
3. A Standard Certificate owned by a REMIC will be considered to
represent an "obligation... which is principally secured by an
interest in real property" within the meaning of Tax Code Section
860G(a)(3)(A) to the extent that the assets of the related Trust
Fund consist of "qualified mortgages" within the meaning of Tax
Code Section 860G(a)(3).
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PREMIUM AND DISCOUNT
Standard Certificateholders are advised to consult with their tax
advisors as to the federal income tax treatment of premium and discount arising
either upon initial acquisition of Standard Certificates or thereafter.
Premium. The treatment of premium incurred upon the purchase of a
Standard Certificate will be determined generally as described above under the
section in this prospectus titled "Taxation of Regular Certificates -
Acquisition Premium."
Original Issue Discount. The original issue discount rules will be
applicable to a Standard Certificateholder's interest in those Mortgage Loans as
to which the conditions for the application of those sections are met. Rules
regarding periodic inclusion of original issue discount income are applicable to
mortgages of corporations originated after May 27, 1969, mortgages of
noncorporate mortgagors (other than individuals) originated after July 1, 1982,
and mortgages of individuals originated after March 2, 1984. Under the OID
Regulations, such original issue discount could arise by the charging of points
by the originator of the mortgages in an amount greater than a statutory de
minimis exception, including a payment of points currently deductible by the
borrower under applicable Tax Code provisions or, under certain circumstances,
by the presence of "teaser rates" on the Mortgage Loans.
Original issue discount must generally be reported as ordinary gross
income as it accrues under a constant interest method that takes into account
the compounding of interest, in advance of the cash attributable to such income.
Unless indicated otherwise in the applicable prospectus supplement, no
prepayment assumption will be assumed for purposes of such accrual. However, Tax
Code Section 1272 provides for a reduction in the amount of original issue
discount includible in the income of a holder of an obligation that acquires the
obligation after its initial issuance at a price greater than the sum of the
original issue price and the previously accrued original issue discount, less
prior payments of principal. Accordingly, if the Mortgage Loans acquired by a
Standard Certificateholder are purchased at a price equal to the then unpaid
principal amount of the Mortgage Loans, no original issue discount attributable
to the difference between the issue price and the original principal amount of
the Mortgage Loans (i.e., points) will be includible by such holder.
Market Discount. Standard Certificateholders will be subject to the
market discount rules to the extent that the conditions for application of those
sections are met. Market discount on the Mortgage Loans will be determined and
will be reported as ordinary income generally in the manner described above
under "Material Federal Income Tax Consequences for REMIC Certificates-Taxation
of Regular Certificates-Market Discount", except that the ratable accrual
methods described therein will not apply and it is unclear whether a Prepayment
Assumption would apply. Rather, the holder will accrue market discount pro rata
over the life of the Mortgage Loans, unless the constant yield method is
elected. Unless indicated otherwise in the applicable prospectus supplement, no
prepayment assumption will be assumed for purposes of such accrual.
Recharacterization of Servicing Fees. If the servicing fee paid to the
Master Servicer were deemed to exceed reasonable servicing compensation, the
excess amount would represent neither income nor a deduction to
Certificateholders. In this regard, there are no authoritative guidelines for
federal income tax purposes as to either the maximum amount of servicing
compensation that may be considered reasonable in the context of this or similar
transactions or whether, in the case of the Standard Certificate, the
reasonableness of servicing compensation should be determined on a weighted
average or loan-by-loan basis. If a loan-by-loan basis is appropriate, the
likelihood that the servicing fee would exceed reasonable servicing compensation
as to some of the Mortgage Loans would be increased. Service guidance indicates
that a servicing fee in excess of reasonable compensation ("excess servicing")
will cause the Mortgage Loans to be treated under the "stripped bond" rules and
provides safe harbors for servicing deemed to be reasonable and requires
taxpayers to demonstrate that the value of servicing fees in excess of the safe
harbor amounts is not greater than the value of the services provided.
Accordingly, if the Service's approach is upheld, a servicer who
receives a servicing fee in excess of reasonable servicing compensation would be
viewed as retaining an ownership interest in a portion of the interest payments
on the Mortgage Loans. Under the rules of Tax Code Section 1286, the separation
of ownership of the right to receive some or all of the interest payments on an
obligation from the right to receive some or all of the principal payments on
the obligation would result in treatment of the Mortgage Loans as "stripped
coupons" and "stripped bonds". Subject to the de minimis rule discussed below
under "-Stripped Certificates", each stripped bond or stripped coupon could be
considered for this purpose as a non-interest bearing obligation issued on the
date of issue of the Standard Certificates, and the original issue discount
rules of the Tax Code would apply to the holder thereof. While Standard
Certificateholders would still be treated as owners of beneficial interests in a
grantor trust for federal income tax purposes, the corpus of the trust could be
viewed as excluding the portion of the Mortgage Loans the ownership of which is
attributed to the Master Servicer, or as including that portion as a second
class of equitable interest. Applicable
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Treasury regulations treat such an arrangement as a fixed investment trust,
since the multiple classes of trust interests should be treated as merely
facilitating direct investments in the trust assets and the existence of
multiple classes of ownership interests is incidental to that purpose. In
general, this recharacterization should not have any significant effect upon the
timing or amount of income reported by a Standard Certificateholder, except that
the income reported by a cash method holder may be slightly accelerated. See
"Stripped Certificates" below for a further description of the federal income
tax treatment of stripped bonds and stripped coupons.
Sale or Exchange of Standard Certificates. Upon sale or exchange of a
Standard Certificate, a Standard Certificateholder will recognize gain or loss
equal to the difference between the amount received and its aggregate adjusted
basis in the Mortgage Loans and the other assets represented by the Standard
Certificate. In general, the aggregate adjusted basis will equal the Standard
Certificateholder's cost for the Standard Certificate, increased by the amount
of any income previously reported with respect to the Standard Certificate and
decreased by the amount of any losses previously reported with respect to the
Standard Certificate and the amount of any distributions received thereon.
Except as provided above with respect to market discount on any Mortgage Loans,
and except for certain financial institutions subject to the provisions of Tax
Code Section 582(c), any gain or loss would be capital gain or loss if the
Standard Certificate was held as a capital asset. However, gain on the sale of a
Standard Certificate will be treated as ordinary income (1) if a Standard
Certificate is held as part of a "conversion transaction" as defined in Tax Code
Section 1258(c), up to the amount of interest that would have accrued on the
Standard Certificateholder's net investment in the conversion transaction at
120% of the appropriate applicable Federal rate in effect at the time the
taxpayer entered into the transaction minus any amount previously treated as
ordinary income with respect to any prior disposition of property that was held
as a part of such transaction or (2) in the case of a non-corporate taxpayer, to
the extent such taxpayer has made an election under Tax Code Section 163(d)(4)
to have net capital gains taxed as investment income at ordinary income rates.
Capital gains of certain non-corporate taxpayers are subject to a lower maximum
tax rate (28%) than ordinary income of such taxpayers (39.6%) for property held
for more than one year but not more than 18 months, and a still lower maximum
rate (20%) for property held for more than 18 months. The maximum tax rate for
corporations is the same with respect to both ordinary income and capital gains.
STRIPPED CERTIFICATES
GENERAL
Pursuant to Tax Code Section 1286, the separation of ownership of the
right to receive some or all of the principal payments on an obligation from
ownership of the right to receive some or all of the interest payments results
in the creation of "stripped bonds" with respect to principal payments and
"stripped coupons" with respect to interest payments. For purposes of this
discussion, Certificates that are subject to those rules will be referred to as
"Stripped Certificates". Stripped Certificates include "Stripped Interest
Certificates" and "Stripped Principal Certificates" (as defined in this
Prospectus) as to which no REMIC election is made.
The Certificates will be subject to those rules if (1) the Depositor or
any of its affiliates retains (for its own account or for purposes of resale),
in the form of fixed retained yield or otherwise, an ownership interest in a
portion of the payments on the Mortgage Loans, (2) the Master Servicer is
treated as having an ownership interest in the Mortgage Loans to the extent it
is paid (or retains) servicing compensation in an amount greater than reasonable
consideration for servicing the Mortgage Loans (see "Standard
Certificates-Recharacterization of Servicing Fees" above) and (3) Certificates
are issued in two or more classes or subclasses representing the right to
non-pro-rata percentages of the interest and principal payments on the Mortgage
Loans.
In general, a holder of a Stripped Certificate will be considered to
own "stripped bonds" with respect to its pro rata share of all or a portion of
the principal payments on each Mortgage Loan and/or "stripped coupons" with
respect to its pro rata share of all or a portion of the interest payments on
each Mortgage Loan, including the Stripped Certificate's allocable share of the
servicing fees paid to the Master Servicer, to the extent that those fees
represent reasonable compensation for services rendered. See discussion above
under "Standard Certificates-Recharacterization of Servicing Fees". Although not
free from doubt, for purposes of reporting to Stripped Certificateholders, the
servicing fees will be allocated to the Stripped Certificates in proportion to
the respective entitlements to distributions of each class (or subclass) of
Stripped Certificates for the related period or periods. The holder of a
Stripped Certificate generally will be entitled to a deduction each year in
respect of the servicing fees, as described above under "Standard
Certificates-General", subject to the limitation described therein.
Tax Code Section 1286 treats a stripped bond or a stripped coupon as an
obligation issued at an original issue discount on the date that the stripped
interest is purchased. Although the treatment of Stripped Certificates for
federal income tax purposes is not clear in certain respects at this time,
particularly where the Stripped Certificates are issued with respect to a
Mortgage Pool
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containing variable-rate Mortgage Loans, the Depositor has been advised by
counsel that (1) the Trust Fund will be treated as a grantor trust under subpart
E, Part 1 of subchapter J of the Tax Code and not as an association taxable as a
corporation or a "taxable mortgage pool" within the meaning of Tax Code Section
7701(i), and (2) each Stripped Certificate should be treated as a single
installment obligation for purposes of calculating original issue discount and
gain or loss on disposition. This treatment is based on the interrelationship of
Tax Code Section 1286, Tax Code Sections 1272 through 1275, and the OID
Regulations. While under Tax Code Section 1286 computations with respect to
Stripped Certificates arguably should be made in one of the ways described below
under "Taxation of Stripped-Certificates-Possible Alternative
Characterizations," the OID Regulations state, in general, that two or more debt
instruments issued by a single issuer to a single investor in a single
transaction should be treated as a single debt instrument for original issue
discount purposes. The Pooling and Servicing Agreement requires that the Trustee
make and report all computations described below using this aggregate approach,
unless substantial legal authority requires otherwise.
Furthermore, Treasury regulations issued December 28, 1992 assume that
a Stripped Certificate will be treated as a single debt instrument issued on the
date it is purchased for purposes of calculating any original issue discount and
that the interest component of a Stripped Certificate would be treated as
qualified stated interest under the OID Regulations. Pursuant to these final
regulations the purchaser of a Stripped Certificate will be required to account
for any discount as market discount rather than original issue discount unless
either (1) the initial discount with respect to the Stripped Certificate was
treated as zero under the de minimis rule of Tax Code Section 1273(a)(3), or (2)
no more than 100 basis points in excess of reasonable servicing is stripped off
the related Mortgage Loans. Any market discount would be reportable as described
under "Material Federal Income Tax Consequences for REMIC Certificates-Taxation
of Regular Certificates-Market Discount," without regard to the de minimis rule
therein, assuming that a prepayment assumption is employed in such computation.
STATUS OF STRIPPED CERTIFICATES
No specific legal authority exists as to whether the character of the
Stripped Certificates, for federal income tax purposes, will be the same as that
of the Mortgage Loans. Although the issue is not free from doubt, counsel has
advised the Depositor that Stripped Certificates owned by applicable holders
should be considered to represent "real estate assets" within the meaning of Tax
Code Section 856(c)(4)(A), "obligation[s] principally secured by an interest in
real property" within the meaning of Tax Code Section 860G(a)(3)(A), and
"loans... secured by an interest in real property which is... residential real
property" within the meaning of Tax Code Section 7701(a)(19)(C)(v), and interest
(including original issue discount) income attributable to Stripped Certificates
should be considered to represent "interest on obligations secured by mortgages
on real property" within the meaning of Tax Code Section 856(c)(3)(B), provided
that in each case the Mortgage Loans and interest on the Mortgage Loans qualify
for such treatment.
TAXATION OF STRIPPED CERTIFICATES
Original Issue Discount. Except as described above under "General",
each Stripped Certificate will be considered to have been issued at an original
issue discount for federal income tax purposes. Original issue discount with
respect to a Stripped Certificate must be included in ordinary income as it
accrues, in accordance with a constant interest method that takes into account
the compounding of interest, which may be prior to the receipt of the cash
attributable to such income. Based in part on the OID Regulations and the
amendments to the original issue discount sections of the Tax Code made by the
1986 Act, the amount of original issue discount required to be included in the
income of a holder of a Stripped Certificate (referred to in this discussion as
a "Stripped Certificateholder") in any taxable year likely will be computed
generally as described above under "Federal Income Tax Consequences for REMIC
Certificates-Taxation of Regular Certificates-Original Issue Discount" and
"-Variable Rate Regular Certificates". However, with the apparent exception of a
Stripped Certificate qualifying as a market discount obligation, as described
above under "General", the issue price of a Stripped Certificate will be the
purchase price paid by each holder thereof, and the stated redemption price at
maturity will include the aggregate amount of the payments, other than qualified
stated interest to be made on the Stripped Certificate to such Stripped
Certificateholder, presumably under the Prepayment Assumption.
If the Mortgage Loans prepay at a rate either faster or slower than
that under the Prepayment Assumption, a Stripped Certificateholder's recognition
of original issue discount will be either accelerated or decelerated and the
amount of original issue discount will be either increased or decreased
depending on the relative interests in principal and interest on each Mortgage
Loan represented by the Stripped Certificateholder's Stripped Certificate. While
the matter is not free from doubt, the holder of a Stripped Certificate should
be entitled in the year that it becomes certain (assuming no further
prepayments) that the holder will not recover a portion of its adjusted basis in
a Stripped Certificate to recognize an ordinary loss equal to the portion of
unrecoverable basis.
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As an alternative to the method described above, the fact that some or
all of the interest payments with respect to the Stripped Certificates will not
be made if the Mortgage Loans are prepaid could lead to the interpretation that
the interest payments are "contingent" within the meaning of the OID
Regulations. The OID Regulations, as they relate to the treatment of contingent
interest, are by their terms not applicable to prepayable securities such as the
Stripped Certificates. However, if final regulations dealing with contingent
interest with respect to the Stripped Certificates apply the same principles as
the OID Regulations, the regulations may lead to different timing of income
inclusion that would be the case under the OID Regulations. Furthermore,
application of such principles could lead to the characterization of gain on the
sale of contingent interest Stripped Certificates as ordinary income. Investors
should consult their tax advisors regarding the appropriate tax treatment of
Stripped Certificates.
Sale or Exchange of Stripped Certificates. Sale or exchange of a
Stripped Certificate prior to its maturity will result in gain or loss equal to
the difference, if any, between the amount received and the Stripped
Certificateholder's adjusted basis in the Stripped Certificate, as described
above under "Material Federal Income Tax Consequences for REMIC
Certificates-Taxation of Regular Certificates-Sale or Exchange of Regular
Certificates". To the extent that a subsequent purchaser's purchase price is
exceeded by the remaining payments on the Stripped Certificates, the subsequent
purchaser will be required for federal income tax purposes to accrue and report
any excess as if it were original issue discount in the manner described above.
It is not clear whether the assumed prepayment rate that is to be used in the
case of a Stripped Certificateholder other than an original Stripped
Certificateholder should be the Prepayment Assumption or a new rate based on the
circumstances at the date of subsequent purchase.
Purchase of More Than One Class of Stripped Certificates. Where an
investor purchases more than one class of Stripped Certificates, it is currently
unclear whether for federal income tax purposes the classes of Stripped
Certificates should be treated separately or aggregated for purposes of the
rules described above.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates discussed above are not the only possible interpretations
of the applicable Tax Code provisions. For example, the Stripped
Certificateholder may be treated as the owner of (1) one installment obligation
consisting of the Stripped Certificate's pro rata share of the payments
attributable to principal on each Mortgage Loan and a second installment
obligation consisting of the Stripped Certificate's pro rata share of the
payments attributable to interest on each Mortgage Loan, (2) as many stripped
bonds or stripped coupons as there are scheduled payments of principal and/or
interest on each Mortgage Loan or (3) a separate installment obligation for each
Mortgage Loan, representing the Stripped Certificate's pro rata share of
payments of principal and/or interest to be made with respect thereto.
Alternatively, the holder of one or more classes of Stripped Certificates may be
treated as the owner of a pro rata fractional undivided interest in each
Mortgage Loan to the extent that the Stripped Certificate, or classes of
Stripped Certificates in the aggregate, represent the same pro rata portion of
principal and interest on each Mortgage Loan, and a stripped bond or stripped
coupon (as the case may be), treated as an installment obligation or contingent
payment obligation, as to the remainder. Final regulations issued on December
28, 1992 regarding original issue discount on stripped obligations make the
foregoing interpretations less likely to be applicable. The preamble to those
regulations states that they are premised on the assumption that an aggregation
approach is appropriate for determining whether original issue discount on a
stripped bond or stripped coupon is de minimis, and solicits comments on
appropriate rules for aggregating stripped bonds and stripped coupons under Tax
Code Section 1286.
Because of these possible varying characterizations of Stripped
Certificates and the resultant differing treatment of income recognition,
Stripped Certificateholders are urged to consult their own tax advisors
regarding the proper treatment of Stripped Certificates for federal income tax
purposes.
FEDERAL INCOME TAX CONSEQUENCES FOR FASIT CERTIFICATES
If specified in the prospectus supplement relating to a particular
series of Certificates, an election may be made to treat the related Trust Fund
or one or more segregated pools of assets therein as one or more financial asset
securitization investment trusts ("FASITs") within the meaning of Tax Code
Section 860L(a). Qualification as a FASIT requires ongoing compliance with
certain conditions. With respect to each series of FASIT Certificates, O'Melveny
& Myers LLP, counsel to the Depositor, will advise the Depositor that in the
firm's opinion, assuming (1) the making of a FASIT election, (2) compliance with
the Pooling and Servicing Agreement and (3) compliance with any changes in the
law, including any amendments to the Tax Code or applicable Treasury Regulations
thereunder, each FASIT Pool will qualify as a FASIT. In such case, the Regular
Certificates will be considered to be "regular interests" in the FASIT and will
be treated for federal income tax purposes as if they were newly originated debt
instruments, and the Residual Certificate will be considered the "ownership
interest" in the FASIT Pool. The
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prospectus supplement for each series of Certificates will indicate whether one
or more FASIT elections will be made with respect to the related Trust Fund.
FASIT treatment has become available pursuant to recently enacted
legislation, and no Treasury Regulations have as yet been issued detailing the
circumstances under which a FASIT election may be made or the consequences of
such an election. If a FASIT election is made with respect to any Trust Fund or
as to any segregated pool of assets therein, the related prospectus supplement
will describe the Federal income tax consequences of such election.
REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The Trustee will furnish to each Standard Certificateholder, within a
reasonable time after the end of each calendar year, or Stripped
Certificateholder, at any time during such year, information (prepared on the
basis described above) as the Trustee deems to be necessary or desirable to
enable the Certificateholders to prepare their federal income tax returns. The
information will include the amount of original issue discount accrued on
Certificates held by persons other than Certificateholders exempted from the
reporting requirements. The amounts required to be reported by the Trustee may
not be equal to the proper amount of original issue discount required to be
reported as taxable income by a Certificateholder, other than an original
Certificateholder that purchased at the issue price. In particular, in the case
of Stripped Certificates, unless provided otherwise in the applicable prospectus
supplement, such reporting will be based upon a representative initial offering
price of each class of Stripped Certificates. The Trustee will also file this
original issue discount information with the Service. If a Certificateholder
fails to supply an accurate taxpayer identification number or if the Secretary
of the Treasury determines that a Certificateholder has not reported all
interest and dividend income required to be shown on his federal income tax
return, 31% backup withholding may be required in respect of any reportable
payments, as described above under "Material Federal Income Tax Consequences for
REMIC Certificates-Backup Withholding".
TAXATION OF CERTAIN FOREIGN INVESTORS
To the extent that a Certificate evidences ownership in Mortgage Loans
that are issued on or before July 18, 1984, interest or original issue discount
paid by the person required to withhold tax under Tax Code Section 1441 or 1442
to nonresident aliens, foreign corporations, or other Non-U.S. Persons generally
will be subject to 30% United States withholding tax, or such lower rate as may
be provided for interest by an applicable tax treaty. Accrued original issue
discount recognized by the Standard Certificateholder or Stripped
Certificateholder on original issue discount recognized by the Standard
Certificateholder or Stripped Certificateholders on the sale or exchange of such
a Certificate also will be subject to federal income tax at the same rate.
Treasury regulations provide that interest or original issue discount
paid by the Trustee or other withholding agent to a Non-U.S. Person evidencing
ownership interest in Mortgage Loans issued after July 18, 1984 will be
"portfolio interest" and will be treated in the manner, and such persons will be
subject to the same certification requirements, described above under "Material
Federal Income Tax Consequences for REMIC Certificates-Taxation of Certain
Foreign Investors-Regular Certificates".
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described in
"Material Federal Income Tax Consequences", potential investors should consider
the state and local tax consequences of the acquisition, ownership, and
disposition of the Offered Certificates. State tax law may differ substantially
from the corresponding federal law, and the discussion above does not describe
the tax laws of any state or other jurisdiction. Prospective investors should
consult their own tax advisors with respect to the various tax consequences of
investments in the Offered 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) with respect to
assets of those Plans. Section 4975 of the Tax Code prohibits a similar set of
transactions between certain plans ("Tax Code Plans," and together with ERISA
Plans, "Plans") and persons who are "disqualified persons" (as defined in the
Tax Code) with respect to Tax 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 Tax Code) are not subject to the requirements of ERISA or
Section 4975 of the Tax Code, and assets of such plans may be invested in
Certificates, subject to the provisions of other applicable federal and state
law. However, any governmental or church plan which is qualified
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under Section 401 (a) of the Tax Code and exempt from taxation under Section
501(a) of the Tax Code is subject to the prohibited transaction rules set forth
in Section 503 of the Tax 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 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.
PROHIBITED TRANSACTIONS
Section 406 of ERISA and Section 4975 of the Tax Code prohibit parties
in interest with respect to ERISA Plans and disqualified persons with respect to
the Tax Code Plans from engaging in certain transactions involving the Plans or
"plan assets" of such Plans, unless a statutory or administrative exemption
applies to the transaction. Section 4975 of the Tax Code and Sections 502(i) and
502(l) of ERISA provide for the imposition of excise taxes and civil penalties
on certain persons that engage or participate in such prohibited transactions.
The Depositor, the Underwriter, the Master Servicer, the Special Servicer, if
any, or the Trustee or certain affiliates thereof may be considered or may
become parties in interest or disqualified persons with respect to a Plan. If
so, the acquisition or holding of Certificates by, on behalf of or with "plan
assets" of the Plan may be considered to give rise to a "prohibited transaction"
within the meaning of ERISA and/or Section 4975 of the Tax Code, unless an
exemption is available. Further, if the underlying assets included in a Trust
Fund were deemed to constitute "plan assets," certain transactions involved in
the operation of the Trust Fund may be deemed to constitute prohibited
transactions under ERISA and/or the Tax Code. Neither ERISA nor Section 4975 of
the Tax Code defines the term "plan assets."
Special caution should be exercised before assets of a Plan are used to
purchase a Certificate if, with respect to such assets, the Depositor, the
Underwriter, the Master Servicer, the Special Servicer, if any, or the Trustee
or an affiliate thereof either (a) has discretionary authority or control with
respect to the investment or management of such assets, including the purchasing
or sale of securities or other property, or (b) has authority or responsibility
to give, or regularly gives, investment advice with respect to such assets
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 needs of the Plan.
The U.S. Department of Labor (the "Department") has issued regulations
(the "Plan Asset Regulations") concerning whether a Plan's assets will be
considered to include an undivided interest in each of the underlying assets of
an entity (such as the Trust Fund) for purposes of the general fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of
ERISA and Section 4975 of the Tax Code, if the Plan acquires an "equity
interest" (such as a Certificate) in an entity.
Certain exceptions are provided in the Plan Asset Regulations whereby
an investing Plan's assets would be considered merely to include its interest in
the Certificates instead of being deemed to include an undivided interest in
each of the underlying assets of the Trust Fund. However, it cannot be predicted
in advance, nor can there be a continuing assurance that the exceptions may be
applicable, because of the factual nature of certain of the rules set forth in
the Regulations. For example, one of the exceptions in the Plan Asset
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,
Tax Code Plans, individual retirement accounts and employee benefit plans not
subject to ERISA (for example, governmental plans). This exemption is tested
immediately after each acquisition of an equity interest in the entity whether
upon initial issuance or in the secondary market. Absent any restrictions on
purchase or transfer, it cannot be assured that benefit plan investors will own
less than 25% of each class of Certificates.
Pursuant to the Plan Asset 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
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 the
assets of a Plan could 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 between insurance company general accounts and parties in
interest; PTCE 91-38, which exempts certain transactions between bank collective
investment funds and parties in interest; PTCE 90-1, which exempts certain
transactions between
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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."
There can be no assurance that any of these exemptions will apply with
respect to any Plan's investment in any Certificates or, even if an exemption
were deemed to apply, that any exemption would apply to all prohibited
transactions that may occur in connection with such investment. Also, the
Department has issued individual administrative exemptions from application of
certain prohibited transaction restrictions of ERISA and the Tax Code to most
underwriters of mortgage-backed securities (each, an "Underwriter's Exemption").
An Underwriter's Exemption can only apply to mortgage-backed securities which,
among other conditions, are sold in an offering with respect to which
underwriter serves as the sole or a managing underwriter, or as a selling or
placement agent. If an Underwriter's Exemption might be applicable to a series
of Certificates, the related prospectus supplement will refer to the
possibility. Further, the related prospectus supplement may provide that certain
classes or series of Certificates may not be purchased by, or transferred to,
Plans or may only be purchased by, or transferred to, an insurance company for
its general account under circumstances that would not result in a prohibited
transaction.
Any fiduciary or other Plan investor 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 Tax 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 Tax Code Section 501(a), including most
varieties of Plans, may give rise to "unrelated business taxable income" as
described in Tax 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
Tax Code Section 511, such as certain governmental plans, as discussed above
under "Material Federal Income Tax Consequences--Taxation of Holders of Residual
Certificates" and "-Restrictions on Ownership and Transfer of Residual
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
Tax Code Plans consult with their counsel regarding the consequences under ERISA
and/or the Tax Code of their acquisition and ownership of Certificates. The sale
of Certificates to a Plan is in no respect a representation by the Depositor,
the applicable underwriter or any other service provider with respect to the
Certificates, such as the Trustee, the Master Servicer and the Special Servicer,
if any, that this investment meets all relevant legal requirements with respect
to investments by plans generally or any particular Plan or that this investment
is appropriate for Plans generally or any particular Plan.
LEGAL INVESTMENT
SECONDARY MORTGAGE ENHANCEMENT ACT OF 1984
The related prospectus supplement specifies the Offered Certificates
that are "mortgage related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984, as amended ("SMMEA"). Certificates not
qualifying as "mortgage related securities" ("Non-SMMEA Certificates") are
subject to various legal investment restrictions which prohibit certain
investors from purchasing such Non-SMMEA Certificates. Accordingly, investors
whose investment authority is subject to legal restrictions should consult their
own legal advisors to determine whether and to what extent the Non-SMMEA
Certificates constitute legal investments for them.
Generally, the only classes of Offered Certificates that will be
"mortgage related securities" for purposes of SMMEA are as follows:
o Certificates rated in one of the two highest rating categories by
one or more Rating Agencies;
o Certificates that are part of a series evidencing interests in a
Trust Fund consisting of loans originated by certain types of
Originators as specified in SMMEA; and
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o Certificates that are part of a series evidencing interests in a
Trust Fund consisting of mortgage loans each of which is secured
by a first lien on either:
(1) a single parcel of real estate with a residential and/or
mixed residential and commercial structure, or
(2) one or more parcels of real estate with one or more
commercial structures.
"Mortgage related securities" constitute legal investments for persons, trusts,
corporations, partnerships, associations, business trusts and business entities
(including depository institutions, insurance companies, trustees and pension
funds) 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 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
under applicable law.
Under SMMEA, a number of states enacted legislation on or before
October 3, 1991 limiting to various extents the ability of certain entities (in
particular, insurance companies) to invest in "mortgage related securities"
secured by liens on residential, or mixed residential and commercial properties,
in most cases by requiring the affected investors to rely solely upon existing
state law, and not SMMEA. Pursuant to Section 347 of the Riegle Community
Development and Regulatory Improvement Act of 1994, states may enact
legislation, on or before September 23, 2001, prohibiting or restricting the
purchase, holding or investment by state regulated entities in 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. Accordingly, the investors
affected by such legislation will be authorized to invest in Offered
Certificates qualifying as "mortgage related securities" only to the extent
provided in such legislation.
SMMEA also amended the legal investment authority of
federally-chartered depository institutions as follows (subject in each case to
regulations the applicable federal regulatory authority may prescribe):
o federal savings and loan associations and federal savings banks
may invest in, sell or otherwise deal in "mortgage related
securities" without limitation as to the percentage of their
assets represented thereby;
o federal credit unions may invest in mortgage related securities;
and
o 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).
Effective December 31, 1996, the Office of the Comptroller of the
Currency (the "OCC") 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 the bank's capital and surplus (but subject to compliance with certain
general standards in 12 C.F.R. Section 1.5 concerning "safety and soundness" and
retention of credit information), certain "Type IV securities," (defined in 12
C.F.R. Section 1.2 (1) 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 SMMEA, 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 mortgage-related
securities," and thus as "Type IV securities," for investment by national banks.
Federal credit unions should review NCUA Letter to Credit Unions No.
96, as modified by Letter to Credit Unions No. 108, which includes guidelines to
assist federal credit unions in making investment decisions for mortgage related
securities. The NCUA has adopted rules, codified as 12 C.F.R. Section 703.5
(f)-(k), which prohibit federal credit unions from investing in certain mortgage
related securities (including securities such as certain classes of the Offered
Certificates), except under limited circumstances. Effective January 1, 1998,
the NCUA has amended its rules governing investments by federal credit unions at
12 C.F.R. Part 703; the revised rules will permit investments in "mortgage
related securities" under certain limited circumstances, but will prohibit
investments in stripped mortgage related securities, residual interests in
mortgage related securities, and commercial
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mortgage related securities, unless the credit union has obtained written
approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. Section 703.140.
OTHER RESTRICTIONS
All depository institutions considering an investment in the Offered
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
"FFIEC"). The Policy Statement, which has been adopted by the Board of Governors
of the Federal Reserve System, the OCC, the Federal Depository Insurance Company
and the Office of Thrift Supervision, and by the NCUA (with certain
modifications), prohibits depository institutions from investing in certain
"high-risk mortgage securities" (including securities such as certain classes of
the Offered Certificates), except under limited circumstances, and sets forth
certain investment practices deemed to be unsuitable for regulated institutions.
On September 29, 1997, the FFEIC released for public comment a proposed
"Supervisory Policy Statement on Investment Securities and End-User Derivatives
Activities" (the "1997 Statement"), which would replace the Policy Statement. As
proposed, the 1997 Statement would delete the specific "high-risk mortgage
securities" tests, and substitute general guidelines which depository
institutions should follow in managing risks (including market, credit,
liquidity, operational (transactional), and legal risks) applicable to all
securities (including mortgage pass-through securities and mortgage-derivative
products) used for investment purposes.
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 class of the
Offered Certificates, as certain classes may be deemed unsuitable investments,
or may otherwise be restricted, under such rules, policies or guidelines (in
certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying," and, with regard to any class of the Offered
Certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
Other than specifying which Offered Certificates are "mortgage related
securities," we make no representations as to the proper characterization of any
class of Offered Certificates for legal investment purposes, financial
institution regulatory purposes, or other purposes, or as to the ability of
particular investors to purchase any class of Offered Certificates under
applicable legal investment restrictions. These uncertainties (and any
unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the Offered Certificates) may
adversely affect the liquidity of any class of Offered Certificates.
Accordingly, all investors 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 of any class
constitute legal investments or are subject to investment, capital or other
restrictions.
PLAN OF DISTRIBUTION
We may sell the Certificates in series either directly or through
underwriters or dealers. The related prospectus supplement or prospectus
supplements for each series will describe the terms of the offering for that
series and will state the public offering or purchase price of each class of
Certificates of that series, or the method by which such price is to be
determined, and the net proceeds to the Depositor from the sale.
If we use underwriters in the sale of any Certificates the underwriters
will acquire the Certificates for their own account and may resell the
Certificates in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices to be determined at the time
of sale or at the time of commitment therefor. The obligations of the
underwriters to purchase the Certificates will be subject to certain conditions.
The underwriters generally will be obligated to purchase all of the Certificates
of a series offered by a prospectus supplement if any of such Certificates are
purchased. The underwriters may sell debt securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters. The underwriters may change from time to time
any initial public offering price and any discounts, concessions or commissions
allowed or re-allowed or paid to dealers.
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The specific managing underwriter or underwriters, if any, with respect
to the offer and sale of a particular series of Certificates will be set forth
on the cover of the related prospectus supplement and the members of the
underwriting syndicate, if any, will be named in the prospectus supplement. We
will identify any underwriters and describe their compensation in a prospectus
supplement.
We also may sell Certificates directly to purchasers without the
involvement of underwriters in which case the related prospectus supplement will
contain information regarding the terms of such offering and any agreements
entered into in connection with that such offering.
Purchasers of Certificates, including dealers, may, depending on the
facts and circumstances of such purchases, be deemed to be "underwriters" within
the meaning of the 1933 Act in connection with reoffers and sales by them of
Certificates. Certificateholders should consult with their legal advisors in
this regard prior to any such reoffer and sale.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon
for the Depositor by O'Melveny & Myers LLP, New York, New York, and for the
Underwriters as specified in the related prospectus supplement.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of
Certificates and no Trust Fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series of
Certificates. Accordingly, no financial statements with respect to any Trust
Fund will be included in this prospectus or in the accompanying prospectus
supplement.
RATING
It is a condition of issuance that a nationally recognized statistical
rating agency (the "Rating Agency") rate the Offered Certificates as investment
grade, that is, in one of the four highest rating categories.
Ratings on the Offered Certificates address the likelihood of all
payments to certificateholders pursuant to the terms of the Certificates. The
ratings of the Offered Certificates will be based on the structural, legal and
issuer-related aspects associated with such Certificates, the nature of the
underlying mortgage loans and the credit quality of the guarantor, if any.
Ratings do not represent any assessment of the likelihood of principal
prepayments by mortgagors of the loans underlying the Offered Certificates and
ratings do not represent the degree by which any actual prepayments might differ
from anticipated prepayments. As a result, holders of the Certificates may
suffer a lower than anticipated yield. In extreme cases, holders of stripped
interest certificates may fail to recoup their initial investments.
A rating is not a recommendation to buy, sell or hold the related
Offering Certificates. There is no assurance that a rating of the Offered
Certificates will not be lowered or withdrawn by the assigning Rating Agency if,
in its judgment, circumstances so warrant. The ratings of the Offered
Certificates should be evaluated independently from similar ratings on other
types of securities.
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INDEX OF SIGNIFICANT DEFINITIONS
Definitions Page [update]
1933 Act..............................................................
1986 Act..............................................................
ACMs..................................................................
Bankruptcy Code.......................................................
CERCLA ...............................................................
Certificateholders....................................................
Certificates..........................................................
Closing Date..........................................................
Code Plans............................................................
Collection Account....................................................
Commission ...........................................................
Compound Interest Certificates........................................
Credit Enhancement....................................................
Credit Enhancement Limitations........................................
Cut-off Date..........................................................
Department............................................................
Depositor.............................................................
disqualified organizations............................................
Distribution Account..................................................
Distribution Date.....................................................
EPA...................................................................
ERISA.................................................................
ERISA Plans...........................................................
Escrow Account........................................................
Escrow Payments.......................................................
Event of Default......................................................
Fannie Mae............................................................
FASIT.................................................................
FHLMC.................................................................
Forfeiture Laws.......................................................
Form 8-K..............................................................
Garn-St. Germain Act..................................................
GNMA..................................................................
Hazardous Materials...................................................
Installment Contracts.................................................
Lead Paint Act........................................................
Master Servicer.......................................................
Master Servicer Remittance Date.......................................
Modifications, Waivers and Amendments.................................
Mortgage..............................................................
Mortgage Loan.........................................................
Mortgage Loan Groups..................................................
Mortgage Loan Schedule................................................
Mortgage Loan Seller..................................................
Mortgage Pool ........................................................
Mortgaged Property....................................................
NCUN..................................................................
Note..................................................................
Offered Certificates..................................................
Pass-Through Entity...................................................
Permitted Investments.................................................
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Plans.................................................................
Policy Statement......................................................
Pooling and Servicing Agreement.......................................
Prepayment Assumption.................................................
Property Protection Expenses..........................................
Rating Agency.........................................................
Regular Certificateholder.............................................
REITs.................................................................
Relief Act............................................................
REMIC.................................................................
REMIC Certificates....................................................
REMIC Pool............................................................
REMIC Regulations.....................................................
REO Account...........................................................
Reserve Account.......................................................
Reserve Fund..........................................................
S&P...................................................................
SBJPA of 1996.........................................................
Senior Certificates...................................................
Service...............................................................
SMMEA.................................................................
Special Servicer......................................................
Special Servicing Fee.................................................
Specially Serviced Mortgage Loans.....................................
Startup Day...........................................................
Stripped Certificates.................................................
Subordinate Certificates..............................................
Tax Code..............................................................
Title V...............................................................
Title VIII............................................................
Trust Fund............................................................
Trustee...............................................................
USTs..................................................................
Voting Rights.........................................................
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the Offered Certificates, other than
underwriting discounts and commissions:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration Fee $ 413,000
Engraving Fee $ 5,000
Legal Fees and Expenses $ 400,000
Accounting Fees and Expenses $ 250,000
Trustee Fees and Expenses $ 40,000
Blue Sky Qualification Fees and Expenses $ 10,000
Rating Agency Fees (Two Agencies) $1,300,000
Miscellaneous $ 10,000
----------
Total $2,428,000
</TABLE>
ITEM 15 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 7 of the proposed Underwriting Agreement, the
Underwriters are obligated under certain circumstances to indemnify certain
controlling persons of the Registrant against certain liabilities, including
liabilities under the Securities Act of 1933.
The Registrant's By-laws provide for indemnification of directors and
officers of the Registrant to the full extent permitted by Delaware law.
Section 145 of the Delaware General Corporation Law provides, in
substance, that Delaware corporations shall have the power, under specified
circumstances, to indemnify their directors, officers, employees and agents in
connection with actions, suits or proceedings brought against them by a third
party or in the right of the corporation, by reason of the fact that they are or
were directors, officers, employees or agents, against expenses incurred in any
such action, suit or proceeding.
The Pooling and Servicing Agreements may provide that no director,
officer employee or agent of the Registrant is liable to the Trust Fund or the
Certificateholders, except for such person's own willful misfeasance, bad faith
or gross negligence in the performance of duties or reckless disregard of
obligations and duties; provided, however, that the Pooling and Servicing
Agreements may provide that such indemnification will not extend to any loss,
liability or expense (i) that such person is specifically required to bear
pursuant to the terms of such Pooling and Servicing Agreement, or is incidental
to the performance of obligations and duties thereunder and is not otherwise
reimbursable pursuant to such Pooling and Servicing Agreement, or is incidental
to the performance of obligations and duties thereunder and is not otherwise
reimbursable pursuant to such Pooling and Servicing Agreement; (ii) incurred in
connection with any breach of a representation, warranty or covenant made in
such Pooling and Servicing Agreement; (iii) incurred by reason of misfeasance,
bad faith or gross negligence in the performance of obligations or duties under
such Pooling and Servicing Agreement, or by reason of reckless disregard of such
obligations or duties; or (iv) incurred in connection with any violation of any
state or federal securities law.
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ITEM 16 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
All financial statements, schedules and historical
financial information of the Registrant have been omitted as they
are not applicable.
(b) Exhibits:
1.1 Form of Underwriting Agreement
4.1 Form of Pooling and Servicing Agreement
5.1 Opinion of O'Melveny & Myers LLP as to legality of the
Certificates**
8.1 Opinion of O'Melveny & Myers LLP as to certain tax matters
(included in Exhibit 5.1)**
23.1 Consent of O'Melveny & Myers LLP (included in Exhibits 5.1 and 8.1
hereto)**
24.1 Power of Attorney***
===============
** To be filed by amendment.
*** Included on page II-4.
ITEM 17 UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement;
iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change of such information in the
Registration Statement.
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in the post-effective amendment is contained
in periodic reports filed by the Issuer pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described in Item 15 above,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 29th day of
March, 1999.
PRUDENTIAL SECURITIES
SECURED FINANCING CORPORATION
By: /s/ Vincent T. Pica II
--------------------------------
Name: Vincent T. Pica II
Title: President
KNOW ALL MEN THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Vincent T. Pica II his/her true and lawful
attorney-in-fact and agent, with full powers of substitution and resubstitution,
for and in his/her name, place and stead, in any and all capacities to sign any
or all amendments (including post-effective amendments) to this Registration
Statement and any or all other documents in connection therewith, and to file
the same, with all exhibits thereto, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting alone,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as might or could be done in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or his/her substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Form
S-3 Registration Statement has been signed below as of March 29th, 1999, by the
following persons in the capacities indicated:
SIGNATURE TITLE
/s/ Martin Pfinsgraff Chairman of the Board
---------------------------
Martin Pfinsgraff
Director and President
/s/ Vincent T. Pica II
--------------------------- (Principal Executive Officer)
Vincent T. Pica II
/s/ Leland B. Paton Director
---------------------------
Leland B. Paton
/s/ P. Carter Rise Director
---------------------------
P. Carter Rise
/s/ William Horan Chief Financial Officer
---------------------------
William Horan
/s/ Elizabeth W. Castagna Treasurer
--------------------------- (Principal Accounting Officer)
Elizabeth W. Castagna
4
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
1.1 Form of Underwriting Agreement
4.1 Form of Pooling and Servicing Agreement
5.1 Opinion of O'Melveny & Myers LLP as to the legality of the
Certificates**
8.1 Opinion of O'Melveny & Myers LLP as to certain tax matters**
23.1 Consent of O'Melveny & Myers LLP**
24.1 Power of Attorney***
- -------------------
** To be filed by Amendment.
*** Included on Page II-4.
5
<PAGE>
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1998 __, CLASS A-1, CLASS A-2, CLASS A-3,
CLASS B, CLASS C, CLASS D, CLASS E AND CLASS F
UNDERWRITING AGREEMENT
New York, New York
, 199
Prudential Securities Incorporated
One Seaport Plaza - 30th Floor
New York, New York 10292
Ladies and Gentlemen:
Prudential Securities Secured Financing Corporation, a Delaware
corporation (the "Company"), proposes to issue and sell, pursuant to the terms
of this Underwriting Agreement (this "Underwriting Agreement") to [Prudential
Securities Incorporated (or )], as underwriter (the "Underwriter"), the
Prudential Securities Secured Financing Corporation Commercial Mortgage
Pass-Through Certificates, Series _______, Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D, Class E and Class F Certificates (collectively, the
"Offered Certificates") having the respective initial aggregate approximate
Certificate Balances set forth on Schedule I hereto, each Certificate
evidencing an undivided beneficial ownership interest in a separate trust fund
(the "Trust Fund"), the property of which is primarily comprised of a pool (the
"Mortgage Pool") of __ fixed-rate mortgage loans, with original terms to
maturity of not more than years (the "Mortgaged Loans"), secured by first liens
on commercial and multifamily residential properties (the "Mortgaged
Properties"). The Mortgaged Properties consist of office buildings, health-care
related properties, congregate care facilities, hotels and motels, warehouse,
mini warehouse and self-storage facilities, industrial properties, motels and
hotels, mobile home parks, apartment buildings or complexes consisting of five
or more rental units or a complex of duplex units, cooperative apartment
buildings, nursing homes, office/retail properties, anchored retail properties,
single tenant retail properties, unanchored retail properties, and/or other
commercial real estate properties, multifamily residential properties, and/or
mixed residential commercial properties.
The sale of the Offered Securities is to occur simultaneously with the
separate offering of Prudential Securities Secured Financing Corporation
Commercial Mortgage Pass-Through Certificates, Series _______, Class A-1, Class
A-2, Class A-3 and Class A-EC, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K-1, Class K-2, Class R-1, Class R-2 and Class
R-3 (the "Privately Placed Certificates"),
<PAGE>
which are being issued pursuant to the Private Placement Memorandum, dated
_________________ (the "Memorandum") and sold to Prudential Securities
Incorporated, as placement agent (in such capacity, the "Placement Agent")
pursuant to a Certificate Purchase Agreement, dated _________________ (the
"Certificate Purchase Agreement").
The Trust Fund will be established pursuant to an agreement (the "Pooling
and Servicing Agreement") to be dated as of ______________, by and among the
Company, as depositor, _______________________________, as servicer (the
"Servicer"), _____________________, as special servicer (the "Special
Servicer"), _____________________, as trustee (the "Trustee"), and
_________________, as fiscal agent (the "Fiscal Agent").
The Mortgage Loans will be purchased by the Company from ("Mortgage Loan
Sellers"), pursuant to a Mortgage Loan Purchase and Sale Agreement to be dated
as of ______________ (the "Mortgage Loan Purchase and Sale Agreement"), among
the Mortgage Loan Sellers, the Servicer and the Company and will be transferred
to the Trustee, for the benefit of the Certificateholders, in exchange for the
Offered Securities and the Privately Placed Certificates.
Capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned to them in the Pooling and Servicing Agreement.
1. Offering by the Underwriter. Upon the execution of this Underwriting
Agreement and the authorization by the Underwriter of the release of the
Offered Securities, the Underwriter proposes to offer for sale to the public
the Offered Securities at the price and upon the terms set forth in the Final
Prospectus (as hereinafter defined).
2. Conditions of the Underwriter's Obligations. The obligation of the
Underwriter hereunder to purchase the Offered Securities shall be subject to
the accuracy of the representations and warranties on the part of the Company
contained herein as of the date hereof and as of the Closing Date, to the
accuracy of the statements of the Company, the Servicer and the Special
Servicer made in any certificate pursuant to the provisions hereof, to the
performance by the Company in all material respects of its obligations
hereunder and to the following additional conditions:
(a) All actions required to be taken and all filings required to be
made by or on behalf of the Company under the Securities Act of 1933, as
amended (the "1933 Act"), and the Securities Exchange Act of 1934, as
amended (the "1934 Act"), prior to the sale of the Offered Securities
shall have been duly taken or made.
(b) The Underwriter shall have received on the Closing Date an
Officer's Certificate of the Company, dated the Closing Date, to the
effect that: (i) No stop order suspending the effectiveness of the
Company's registration
2
<PAGE>
statement (Registration No. ________) (the "Registration Statement")
shall be in effect; (ii) no proceedings for such purpose shall be
pending before or threatened by the Securities and Exchange Commission
(the "Commission"), or by any authority administering any state
securities or "Blue Sky" laws; (iii) any requests for additional
information on the part of the Commission shall have been complied
with to the Underwriter's reasonable satisfaction, (iv) since the
respective dates as of which information is given in the Registration
Statement, the Prospectus, dated _________________ (the "Prospectus")
and the Prospectus Supplement, dated _________________ (the
"Prospectus Supplement"; together with the Prospectus, the "Final
Prospectus"), there shall have been no material adverse change in the
condition, financial or otherwise, earnings, affairs, regulatory
situation or business prospects of the Company, except as otherwise
stated therein; (v) there are no material actions, suits or
proceedings pending (or threatened) before any court or governmental
agency, authority or body, affecting the Company or the transactions
contemplated by this Underwriting Agreement; and (vi) the Company is
not in violation of its Certificate of Incorporation, as amended, or
its by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, pooling and servicing agreement, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or
by which it or its properties may be bound, which violations or
defaults separately or in the aggregate would have a material adverse
effect on the Company.
(c) Subsequent to the execution of this Underwriting Agreement,
there shall not have occurred any of the following: (i) if at or
prior to the Closing Date, trading in securities on the New York
Stock Exchange shall have been suspended or any material limitation
in trading in securities generally shall have been established on
such exchange, or a banking moratorium shall have been declared by
New York or United States authorities, or (ii) if at or prior to the
Closing Date, there shall have been an outbreak of hostilities
between the United States and any foreign power, or of any other
insurrection or armed conflict involving the United States which
results in the declaration of a national emergency or war, and, in
the reasonable opinion of the Underwriter, makes it impracticable or
inadvisable to offer or sell the Offered Securities.
(d) The Underwriter shall have received written notification
from each of ___________________________ to the effect that the
Offered Securities have been rated no lower than the required ratings
set forth in Schedule I hereto, and as of the Closing Date, such
rating or ratings shall not have been rescinded and there shall not
have been any downgrading, or public notification of a possible
downgrading, or public notification of a possible change without
indication of direction.
(e) The Offered Securities, the Mortgage Loan Purchase and Sale
Agreement, the Pooling and Servicing Agreement and this Underwriting
3
<PAGE>
Agreement shall have been duly authorized, executed and delivered by
the respective parties thereto and shall be in full force and effect.
(f) The Company shall have delivered to the Underwriter an
Officer's Certificate of the Company, dated the Closing Date, to the
effect that the signer of such certificate has carefully examined the
Prospectus Supplement and this Agreement and that: (i) the
representations and warranties of the Company in this Agreement are
true and correct in all material respects at and as of the Closing
Date with the same effect as if made on the Closing Date, (ii) the
Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to
the Closing Date, and (iii) nothing has come to the attention of the
signer that would lead the signer to believe that the Prospectus
Supplement contains any untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
no such representation or warranty shall be required as to statements
contained in or omitted from the Prospectus Supplement in reliance
upon and in conformity with information furnished in writing to the
Company by the Underwriter specifically for use in the Prospectus
Supplement and any amendment or supplement thereto.
(g) The Servicer shall have delivered to the Underwriter an
Officer's Certificate of the general partner of the Servicer, dated
the Closing Date, to the effect that (i) the signer of such
certificate has carefully examined the Prospectus Supplement and that
nothing has come to the attention of the signer that would lead the
signer to believe that the statements in the Prospectus Supplement
relating to the Servicer contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading and (ii)
all of the Servicer's representations and warranties contained in the
Pooling and Servicing Agreement are true and correct as if made on
the Closing Date.
(h) The Special Servicer shall have delivered to the Underwriter
an Officer's Certificate of the Special Servicer, dated the Closing
Date, to the effect that the signer of such certificate has carefully
examined the Prospectus Supplement and that nothing has come to the
attention of the signer that would lead the signer to believe that
the statements in the Prospectus Supplement relating to the Special
Servicer contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
no such representation or warranty shall be required as to statements
contained in or omitted from the Prospectus Supplement in reliance
upon and in conformity with information furnished in
4
<PAGE>
writing to the Company by the Underwriter specifically for use
in the Prospectus Supplement and any amendment or supplement thereto.
(i) The Underwriter shall have received from each of (i)
_______________________, Associate General Counsel of the Company,
and (ii) O'Melveny & Myers LLP, a favorable opinion, dated the
Closing Date, and satisfactory in form and substance to counsel for
the Underwriter. With respect to such opinions, each counsel (a) may
express its reliance as to factual matters on the representations and
warranties made by, and on certificates or other documents furnished
by officers of, the parties to this Underwriting Agreement, the
Pooling and Servicing Agreement and the Mortgage Loan Purchase and
Sale Agreement, (b) may assume the due authorization, execution and
delivery of the instruments and documents referred to therein by the
parties thereto other than the Company (except that O'Melveny & Myers
LLP may rely upon the opinion of __________________, Associate
General Counsel of the Company, as to due authorization and
execution), (c) may render such opinion only as to the federal laws
of the United States of America, the laws of the State of New York
and the General Corporation Law of the State of ______ and (d) may,
to the extent necessary, rely as to the laws of states other than New
York on the opinion of local counsel.
(j) The Underwriter shall have received from O'Melveny & Myers
LLP, ____________ to the underwriter such opinion, dated the Closing
Date, with respect to the issuance and sale of the Offered
Securities, the Pooling and Servicing Agreement, the Mortgage Loan
Purchase and Sale Agreement, this Underwriting Agreement, the Final
Prospectus and other related matters as the Underwriter may
reasonably require, and the Company shall have furnished to such
counsel such documents as they reasonably request for the purpose of
enabling them to pass upon such matters.
(k) The Underwriter shall have received from _________________,
the Company's certified public accountants, a letter dated the date
hereof and satisfactory in form and substance to the Underwriter and
counsel for the Underwriter, to the effect that such accountants have
performed certain specified procedures as a result of which they
confirmed certain information of an accounting, financial or
statistical nature set forth in the Final Prospectus.
(l) The Underwriter shall have received from
_____________________, the Servicer's certified public accountants, a
letter dated the date hereof and satisfactory in form and substance
to the Underwriter and counsel for the Underwriter, to the effect
that such accountants have performed certain specified procedures as
a result of which they confirmed certain information of an
accounting, financial or statistical nature set forth in the Final
Prospectus.
5
<PAGE>
(m) The Underwriter shall have received from _________________,
counsel to the Servicer, a favorable opinion, dated the Closing Date,
in form and substance satisfactory to the Underwriter and counsel for
the Underwriter, to the effect that each of the Pooling and Servicing
Agreement and the Participation Agreement has been duly authorized,
executed and delivered by the Servicer and constitutes the legal,
valid, binding and enforceable agreement of the Servicer, subject, as
to enforceability, to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights in
general and by general principles of equity regardless of whether
enforcement is considered in a proceeding in equity or at law, and as
to such other matters as may be agreed upon by the Underwriter and
the Servicer. With respect to such opinion, such counsel (a) may
express its reliance as to factual matters on the representations and
warranties made by, and on certificates or other documents furnished
by officers of the parties to the Pooling and Servicing Agreement,
(b) may assume the due authorization, execution and delivery of the
instruments and documents referred to therein by the parties thereto
other than the Servicer and (c) may render such opinion only as to
the laws of the State of New York, the State of ________ and the
federal laws of the United States of America.
(n) The Underwriter shall have received from
___________________________________________, counsel to the Special
Servicer, a favorable opinion, dated the Closing Date, in form and
substance satisfactory to the Underwriter and counsel for the
Underwriter, to the effect that the Pooling and Servicing Agreement
has been duly authorized, executed and delivered by the Special
Servicer and constitutes the legal, valid, binding and enforceable
agreement of the Special Servicer, subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights in general and by general principles
of equity regardless of whether enforcement is considered in a
proceeding in equity or at law, and as to such other matters as may
be agreed upon by the Underwriter and the Special Servicer. With
respect to such opinion, such counsel (a) may express its reliance as
to factual matters on the representations and warranties made by, and
on certificates or other documents furnished by officers of the
parties to the Pooling and Servicing Agreement, (b) may assume the
due authorization, execution and delivery of the instruments and
documents referred to therein by the parties thereto other than the
Special Servicer, (c) may render such opinion only as to the laws of
the State of New York, the State of _______ and the federal laws of
the United States of America.
(o) The Underwriter shall have received from ________________,
counsel to the Servicer and the Mortgage Loan Sellers, a favorable
opinion, dated the Closing Date, in form and substance satisfactory
to the Underwriter and counsel for the Underwriter, to the effect
that the Mortgage Loan Purchase and Sale Agreement has been duly
authorized, executed and delivered by the Servicer
6
<PAGE>
and the Mortgage Loan Sellers and constitutes the legal, valid,
binding and enforceable agreement of the Servicer and the Mortgage
Loan Sellers, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights in general and by general principles of equity
regardless of whether enforcement is considered in a proceeding in
equity or at law, and as to such other matters as may be agreed upon
by the Underwriter, the Servicer and the Mortgage Loan Sellers. With
respect to such opinion, such counsel (a) may express its reliance as
to factual matters on the representations and warranties made by, and
on certificates or other documents furnished by officers of the
parties to the Pooling and Servicing Agreement and the Mortgage Loan
Purchase and Sale Agreement, (b) may assume the due authorization,
execution and delivery of the instruments and documents referred to
therein by the parties thereto other than the Servicer and the
Mortgage Loan Sellers (c) may render such opinion only as to the laws
of the State of ________ and the federal laws of the United States of
America.
(p) The Underwriter shall have received from each of (i)
__________________, Esq., Senior Counsel of the Trustee and (ii)
____________________, counsel to the Trustee, a favorable opinion,
dated the Closing Date, in form and substance satisfactory to the
Underwriter and counsel for the Underwriter, to the effect that the
Pooling and Servicing Agreement has been duly authorized, executed
and delivered by the Trustee and constitutes the legal, valid,
binding and enforceable agreement of the Trustee, subject, as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights in general and by
general principles of equity regardless of whether enforcement is
considered in a proceeding in equity or at law, and as to such other
matters as may be agreed upon by the Underwriter and the Trustee
(except that ____________________________ may rely on the opinion of
____________________, Esq., Senior Counsel of the Trustee, as to due
authorization and execution).
(q) The Underwriter shall have received from each of (i)
_______________ Esq., Senior Counsel of the Fiscal Agent and (ii)
_____________________, counsel to the Fiscal Agent, a favorable
opinion dated the Closing Date, in form and substance satisfactory to
the Underwriter and counsel for the Underwriter, to the effect that
the Pooling and Servicing Agreement has been duly authorized,
executed and delivered by the Fiscal Agent and constitutes the legal,
valid, binding and enforceable agreement of the Fiscal Agent,
subject, as to enforceability, to bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights in general and by general principles of equity, regardless of
whether enforcement is considered in a proceeding in equity or at
law, and as to such other matters as may be agreed upon by the
Underwriter and the Fiscal Agent (except that ____________________
may rely on the opinion of __________________, Esq., Senior Counsel
of the Fiscal Agent, as to due authorization and execution).
7
<PAGE>
(r) All proceedings in connection with the transactions
contemplated by this Agreement and all documents incident hereto
shall be satisfactory in form and substance to the Underwriter and
counsel for the Underwriter, and the Underwriter and such counsel
shall have received such information, certificates and documents as
the Underwriter or such counsel may have reasonably requested.
[(s) The Underwriter shall have received a copy of the Letter of
Representations of the Company to The Depository Trust Company with
respect to the Offered Securities.]
(t) All conditions to the obligation of the Placement Agent
pursuant to Section of the Certificate Purchase Agreement shall have
been satisfied.
(u) The Company shall have furnished such further information,
certificates, documents and opinions as the Underwriter may
reasonably request.
If any of the conditions specified in this Section 2 shall not have been
fulfilled in all material respects when and as provided in this Underwriting
Agreement, if the Company is in breach of any covenants or agreements contained
herein or if any of the opinions and certificates referred to above or
elsewhere in this Underwriting Agreement shall not be in all material respects
reasonably satisfactory in form and substance to the Underwriter and counsel
for the Underwriter, this Underwriting Agreement and all obligations of the
Underwriter hereunder may be canceled at, or at any time prior to, the Closing
Date by the Underwriter. Notice of such cancellation shall be given to the
Company in writing, or by telephone, telecopy or telegraph confirmed in
writing.
3. Covenants of the Company. In further consideration of the agreements of
the Underwriter contained in this Underwriting Agreement, the Company covenants
as follows:
(a) The Company shall furnish the Underwriter, without charge,
copies of the Registration Statement and any amendments thereto
including exhibits and as many copies of the Final Prospectus and any
supplements and amendments thereto as the Underwriter may from time
to time reasonably request.
(b) The Company will not file any amendment to the Registration
Statement or any supplement to the Prospectus of which the
Underwriter shall not previously have been advised and furnished with
a copy a reasonable time prior to the proposed filing or to which the
Underwriter shall have reasonably objected. The Company will use its
best efforts to cause any post-effective amendment to the
Registration Statement to become effective as
8
<PAGE>
promptly as possible. During the time when a prospectus is required to
be delivered under the 1933 Act, the Company will comply so far as it
is able with all requirements imposed upon it by the 1933 Act and the
rules and regulations thereunder to the extent necessary to permit the
continuance of sales or of dealings in the Offered Securities in
accordance with the provisions hereof and of the Final Prospectus, and
the Company will prepare and file with the Commission, promptly upon
request by the Underwriter, any amendments to the Registration
Statement or amendments or supplements to the Prospectus which may be
necessary or advisable in connection with the distribution of the
Offered Securities by the Underwriter, and will use its best efforts
to cause the same to become effective as promptly as possible. The
Company will advise the Underwriter, promptly after it receives notice
thereof, of the time when any amendment to the Registration Statement
or any amended Registration Statement has become effective or any
amendment or supplement to the Final Prospectus or any amended
Prospectus has been filed. The Company will advise the Underwriter,
promptly after it receives notice or obtains knowledge thereof, of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary prospectus supplement or the
Final Prospectus, or the suspension of the qualification of the
Offered Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceeding for any such purpose, or
of any request made by the Commission for the amending or
supplementing of the Registration Statement or the Final Prospectus or
for additional information, and the Company will use its best efforts
to prevent the issuance of any such stop order or any order suspending
any such qualification, and if any such order is issued, to obtain the
lifting thereof as promptly as possible.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the 1933 Act, any event
occurs as a result of which the Final Prospectus would include any
untrue statement of a material fact, or omit to state any material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary for any other
reason to amend or supplement the Final Prospectus to comply with the
1933 Act, to promptly notify the Underwriter thereof and upon the
Underwriter's request to prepare and file with the Commission, at the
Company's own expense, an amendment or supplement which will correct
such statement or omission or any amendment which will effect such
compliance.
(d) During the period when a prospectus is required by law to be
delivered in connection with the sale of the Offered Securities
pursuant to this Underwriting Agreement, the Company will file, on a
timely and complete basis, all documents that are required to be
filed by the Company with the Commission pursuant to Sections 13, 14
or 15(d) of the 1934 Act.
9
<PAGE>
(e) The Company shall qualify the Offered Securities for offer
and sale under the securities or "Blue Sky" laws of such
jurisdictions as the Underwriter shall reasonably request and to pay
all expenses (including fees and disbursements of counsel) in
connection with such qualification of the eligibility of the Offered
Securities for investment under the laws of such jurisdictions as the
Underwriter may designate provided that in connection therewith the
Company shall not be required to qualify to do business or to file a
general consent to service of process in any jurisdiction.
(f) For so long as any of the Offered Securities remain
outstanding, to furnish to the Underwriter upon request in writing
copies of such financial statements and other periodic and special
reports as the Company may from time to time distribute generally to
its creditors or the holders of the Offered Securities and to furnish
to the Underwriter copies of each annual or other report the Company
shall be required to file with the Commission.
(g) To the extent, if any, that the rating provided with respect
to the Offered Securities by the rating agency or agencies that
initially rate the Offered Securities is conditional upon the
furnishing of documents or the taking of any other actions by the
Company, the Company shall use its best efforts to furnish such
documents and take any such other actions.
(h) The Company will enter into the Mortgage Loan Purchase and
Sale Agreement and the Pooling and Servicing Agreement on or prior to
the Closing Date.
4. Representations and Warranties of the Company. The Company represents
and warrants to the Underwriter that:
(a) The Registration Statement on Form S-3 (No. ________)
including the Prospectus, has become effective. No stop order
suspending the effectiveness of such Registration Statement has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission. The Prospectus Supplement will be filed
with the Commission pursuant to Rule 424 under the 1933 Act. The
conditions to the use of a registration statement on Form S-3 under
the 1933 Act, as set forth in the General Instructions on Form S- 3,
and the conditions or Rule 415 under the 1933 Act, have been
satisfied with respect to the Company and the Registration Statement.
There are no contracts or documents of the Company that are required
to be filed as exhibits to the Registration Statement pursuant to the
1933 Act or the rules and regulations thereunder that have not been
so filed.
(b) On the effective date of the Registration Statement, the
Registration Statement and the Prospectus conformed in all material
respects to the requirements of the 1933 Act and the rules and
regulations thereunder, and
10
<PAGE>
did not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading; on the date of this
Underwriting Agreement and as of the Closing Date, the Registration
Statement and the Final Prospectus conform, and as amended or
supplemented, if applicable, will conform in all material respects to
the requirements of the 1933 Act and the rules and regulations
thereunder, and on the date of this Underwriting Agreement and as of
the Closing Date, neither of such documents includes any untrue
statement of a material fact of omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and neither of such documents as amended or
supplemented, if applicable, will include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that the foregoing does not apply to statements or
omissions in any of such documents based upon written information
furnished to the Company by the Underwriter specifically for use
therein.
(c) Since the respective dates as of which information is given
in the Registration Statement and the Final Prospectus, except as
otherwise stated therein, there has been no material adverse change
in the condition, financial or otherwise, earnings, affairs,
regulatory situation or business prospects of the Company, whether or
not arising in the ordinary course of business of the Company.
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, has full power and authority (corporate and other)
and all requisite approvals, orders, licenses, certificates and
permits of and from all governmental or regulatory officials and
bodies necessary to own its properties and to conduct its business as
described in the Final Prospectus and to enter into and perform its
obligations under this Agreement, the Pooling and Servicing Agreement
and the Mortgage Loan Purchase and Sale Agreement; and, except as
otherwise set forth or contemplated in the Final Prospectus, there
are no legal or governmental proceedings pending or, to the best
knowledge of the Company, threatened that would result in a material
modification, suspension or revocation thereof.
(e) The Company has all requisite power and authority (corporate
and other) and all requisite authorizations, approvals, order,
licenses, certificates and permits of and from all governmental or
regulatory officials and bodies to own its properties, to conduct its
business as described in the Registration Statement and the Final
Prospectus and to execute, deliver and perform this Underwriting
Agreement, the Pooling and Servicing Agreement and the Mortgage Loan
Purchase and Sale Agreement, except such as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution by the Underwriter of the Offered Securities; all such
11
<PAGE>
authorizations, approvals, orders, licenses, certificates are in full
force and effect and contain no unduly burdensome provisions; and,
except as set forth or contemplated in the Registration Statement or
the Final Prospectus, there are no legal or governmental proceedings
pending or, to the best knowledge of the Company, threatened that
would result in a material modification, suspension or revocation
thereof.
(f) The Offered Securities have been duly authorized, and when
they are issued and delivered pursuant to this Underwriting
Agreement, they will have been duly executed, issued and delivered
and will be entitled to the benefits provided by the Pooling and
Servicing Agreement, subject, as to enforcement, to applicable
bankruptcy, reorganization, insolvency, moratorium and other laws
affecting the rights of creditors generally, and to general
principles of equity (regardless of whether considered in a
proceeding in equity or at law), and will conform in substance to the
description thereof contained in the Registration Statement and the
Final Prospectus, and will in all material respects be in the form
contemplated by the Pooling and Servicing Agreement.
(g) This Agreement has been duly authorized, executed and
delivered by the Company. Each of the Pooling and Servicing Agreement
and the Mortgage Loan Purchase and Sale Agreement, when executed and
delivered as contemplated hereby, will have been duly authorized,
executed and delivered by the Company. This Underwriting Agreement
constitutes, and each of the Pooling and Servicing Agreement and the
Mortgage Loan Purchase and Sale Agreement when so executed and
delivered will constitute, a legal, valid, binding and enforceable
agreement of the Company, subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and to general principles
of equity regardless of whether enforcement is sought in a proceeding
in equity or at law.
(h) As of the Closing Date, the Offered Securities, the Pooling
and Servicing Agreement, the Mortgage Loan Purchase and Sale
Agreement and each of the Mortgage Loans will each conform in all
material respects to the respective descriptions thereof contained in
the Prospectus Supplement, and on the Closing Date, the Company
(pursuant to the Pooling and Servicing Agreement) will assign to the
Trustee for the benefit of the Certificateholders of the Offered
Securities, certain representations and warranties with respect to
the Mortgage Loans made by the Mortgage Loan Sellers to the Company
in the Mortgage Loan Purchase and Sale Agreement, and the
representations and warranties will be true and correct in all
material respects.
(i) No filing or registration with, or notice to, or consent,
approval, non-disapproval, authorization or order or other action of,
any court or governmental authority or agency is required for the
consummation by the Company of the transactions contemplated by this
Underwriting Agreement or the
12
<PAGE>
Pooling and Servicing Agreement, except such as have been obtained and
except such as may be required under the 1933 Act, the rules and
regulations thereunder, or state securities or "Blue Sky" laws, in
connection with the purchase and distribution of the Offered
Securities by the Underwriter.
(j) The Company owns or possesses or has obtained all material
governmental licenses, permits, consents, orders, approvals and other
authorizations necessary to lease, own or license, as the case may
be, and to operate, its properties and to carry on its business as
presently conducted and has received no notice of proceedings
relating to the revocation of any such license, permit, consent,
order or approval, which singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would materially
adversely affect the conduct of the business, results of operations,
net worth or condition (financial or otherwise) of the Company.
(k) Other than as set forth or contemplated in the Final
Prospectus, there are no legal or governmental proceedings pending to
which the Company is a party or of which any property of the Company
is the subject which, if determined adversely to the Company would
individually or in the aggregate have a material adverse effect on
the condition (financial or otherwise), earnings, affairs, business
or business prospects of the Company and, to the best of the
Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(l) As of the Closing Date, each of the Mortgage Loans will meet
the criteria for selection described in the Final Prospectus, and at
the Closing Date, the representations and warranties made by the
Company in the Pooling and Servicing Agreement will be true and
correct as of the date made.
(m) At the time of execution and delivery of the Pooling and
Servicing Agreement, the Company will have good and marketable title
to the Mortgage Loans, free and clear of any lien, mortgage, pledge,
charge, encumbrance, adverse claim or other security interest
(collectively "Liens"), and will not have assigned to any person any
of its right, title or interest in the Mortgage Loans or in the
Pooling and Servicing Agreement or the Offered Securities, the
Company will have the power and authority to transfer the Offered
Securities to the Underwriter, and, upon execution and delivery to
the Trustee of the Pooling and Servicing Agreement and delivery to
the Underwriter of the Offered Securities, and delivery to the
Underwriter of the Privately Placed Certificates, the Trustee will
have good and marketable title to the Mortgage Loans and the
Underwriter will have good and marketable title to the Offered
Securities, in each case free and clear of any Liens.
(n) Neither the Company nor the Trust Fund is, and neither (i)
the issuance and sale of the Offered Securities in the manner
contemplated by
13
<PAGE>
the Final Prospectus or the issuance and sale of the Publicly Offered
Certificates in the manner contemplated by the Final Prospectus, nor
(ii) the activities of the Trust Fund pursuant to the Pooling and
Servicing Agreement will cause the Company or the Trust Fund to be an
"investment company" or under the control of an "investment company,"
as such terms are defined in the Investment Company Act of 1940, as
amended.
(o) The Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended, and the
Trust Fund is not required to be registered under the Investment
Company Act of 1940, as amended.
(p) Any taxes, fees and other governmental charges in connection
with the execution, delivery and issuance of this Underwriting
Agreement, this Underwriting Agreement, the Pooling and Servicing
Agreement and the Offered Securities have been or will be paid at or
prior to the Closing.
5. Indemnification and Contribution.
(a) Regardless of whether any _____________ are sold, the Company will
indemnify and hold harmless each Underwriter, each of their respective officers
and directors and each person who controls each Underwriter within the meaning
of the 1933 Act or the 1934 Act, against any and all losses, claims, damages,
or liabilities (including the cost of any investigation, legal and other
expenses incurred in connection with and amounts paid in settlement of any
action, suit, proceeding or claim asserted), joint or several, to which they
may become subject, under the 1933 Act, the 1934 Act or other federal or state
law or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material fact
contained (i) in the Registration Statement, or any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein, not misleading or (ii) in the Basic Prospectus or the Prospectus
Supplement or any amendment thereto or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and will reimburse each such
indemnified party for any legal or other expenses reasonably incurred by it in
connection with investigating or defending against such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made therein in reliance upon and in conformity
with written information relating to the Underwriter furnished to the Company
by such Underwriter specifically for use in connection with the preparation
thereof.
14
<PAGE>
(b) Regardless of whether any Certificates are sold, each Underwriter,
severally and not jointly, will indemnify and hold harmless the Company, each
of its officers and directors and each person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act against any losses, claims,
damages or liabilities to which they become subject under the 1933 Act, the
1934 Act or other federal or state law or regulation, at common law or
otherwise, to the same extent as the foregoing indemnity, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in (i) the Registration Statement, or any amendment
thereof or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact necessary to make the
statements therein not misleading or in (ii) the Prospectus or the Prospectus
Supplement or any amendment thereto or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made therein in reliance upon and in
conformity with written information relating to the Underwriter furnished to
the Company by such Underwriter specifically for use in the preparation thereof
and so acknowledged in writing, and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending against such loss, claim, damage, liability or
action.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraphs a, b and c of this Section 5, such person
(hereinafter called the indemnified party) shall promptly notify the person
against whom such indemnity may be sought (hereinafter called the indemnifying
party) in writing thereof; but the omission to notify the indemnifying party
shall not relieve such indemnifying party from any liability which it may have
to any indemnified party otherwise than under such Paragraph. The indemnifying
party, upon request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party and
any others the indemnifying party may designate in such proceeding and shall
pay the fees and disbursements of such counsel related to such proceeding. In
any such proceeding any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
part shall have mutually agreed to the retention of such counsel, or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties, and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm
15
<PAGE>
shall be designated in writing by the Underwriters in the case of parties
indemnified pursuant to paragraph a of this Section 5 and by the Company in the
case of parties indemnified pursuant to paragraphs b and e of this Section 5.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an indemnified party shall have requested an indemnifying party
to reimburse the indemnified party for fees and expenses of counsel as
contemplated above, the indemnifying party agrees that it shall be liable for
any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is
or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional
release of such indemnified party from all liability on claims that are the
subject matter of such proceeding.
(d) Each Underwriter agrees, severally and not jointly, to provide the
Company no later than the date on which the Prospectus Supplement is required
to be filed pursuant to Rule 424 (or such other time as is necessary to permit
timely filing as required by the Securities Exchange Commission and its rules)
with a copy of any Derived Information (defined below) for filing with the
Commission on Form 8-K.
(e) Each Underwriter agrees, jointly and not severally, assuming all
Company-Provided Information (defined below) is accurate and complete in all
material respects, to indemnify and hold harmless the Company, its respective
officers and directors and each person who controls the Company within the
meaning of the Securities Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they may become
subject under the Securities Act or the Exchange Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement of a material fact
contained in the Derived Information provided by such Underwriter, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and agrees to reimburse each such indemnified party for any legal
or other expenses reasonably incurred by him, her or it in connection with
investigating or defending or preparing to defend any such loss, claim, damage,
liability or action as such expenses are incurred. The several obligations of
each Underwriter under this Section 5(e) shall be in addition to any liability
which each Underwriter may otherwise have.
16
<PAGE>
The procedures set forth in Section 5(c) shall be equally applicable to
this Section 5(e).
(f) For purposes of this Section 5, the term "Derived Information" means
such portion, if any, of the information delivered to the Companies pursuant to
Section 5(d) for filing with the Commission on Form 8-K as: (i) is not
contained in the Prospectus without taking into account information
incorporated therein by reference; and (ii) does not constitute
Company-Provided Information. "Company-Provided Information" means any computer
tape furnished to the Underwriters by the Company concerning the assets
comprising the Trust.
(g) If the indemnification provided for in this Section 5 is unavailable
to an indemnified party in respect of any losses, claims, damages or
liabilities referred to herein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and each Underwriter from the sale of the
Certificates or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only relative benefits referred to in clause (i) above but also the
relative fault of the Company and of each Underwriter in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company and each Underwriter shall be deemed
to be in such proportion so that each Underwriter is responsible for that
portion determined by multiplying the total amount of such losses, claims,
damages and liabilities, including legal and other expenses, by a fraction, the
numerator of which is (x) the excess of the Aggregate Resale Price (as defined
below) of the Offered Certificates underwritten by such Underwriter over the
aggregate purchase price of such Certificates specified in Section of this
Agreement and the related Prospectus Supplement, and the denominator of which
is (y) the Aggregate Resale Price of such Offered Certificates, and the Company
is responsible for the balance; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11 (f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of the immediately preceding
sentence, the "Aggregate Resale Price" of the Offered Certificates at the time
of any determination shall be the weighted average of the purchase prices (in
each case expressed as a percentage of the aggregate principal amount of the
Offered Certificates so purchased), determined on the basis of such principal
amounts, paid to the Underwriter by all subsequent purchasers that purchased
the Offered Certificates on or prior to such date of determination. The
relative fault of the Company and each Underwriter shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by either
Underwriter and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
17
<PAGE>
(h) The Company and each Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in paragraph g of this Section 5.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (g) of this Section 5
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, neither Underwriter shall be
required to contribute any amount by which the Aggregate Resale Price exceeds
the amount of any damages that such Underwriter has otherwise been required to
pay by reason of any untrue or alleged untrue statement or omission or alleged
omission.
(i) The Company and each Underwriter each expressly waive, and agree not
to assert, any defense to their respective indemnification and contribution
obligations under this Section 5 which they might otherwise assert based upon
any claim that such obligations are unenforceable under federal or state
securities laws or by reasons of public policy.
(j) The obligations of the Company under this Section 5 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls the Underwriter within the meaning of the 1933 Act or the 1934 Act;
and the obligations of the Underwriters under this Section 5 shall be in
addition to any liability that the Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each director of the Company and
to each person, if any, who controls the Company within the meaning of the 1933
Act or the 1934 Act; provided, however, that in no event shall the Company or
either Underwriter be liable for double indemnification.
6. Survival of Certain Representations and Obligations. The respective
representations, warranties, agreements, covenants, indemnities and other
statements of the Company, its officers and the Underwriter set forth in, or
made pursuant to, this Underwriting Agreement shall remain in full force and
effect, regardless of any investigation, or statement as to the result thereof,
made by or on behalf of any Underwriter, the Company, or any of the offices or
directors or any controlling person of any of the foregoing, and shall survive
the delivery of and payment for the offered Securities.
7. Termination. (a) This Underwriting Agreement may be terminated by the
Company by notice to the Underwriter in the event that a stop order suspending
the effectiveness of the Registration Statement shall have been issued or
proceedings for that purpose shall have been instituted or threatened.
(b) This Underwriting Agreement may be terminated by the Underwriter by
notice to the Company in the event that the Company or the Servicer
18
<PAGE>
shall have failed, refused or been unable to perform all obligations and
satisfy all conditions to be performed or satisfied hereunder by the Company at
or prior to the Closing Date.
(c) Termination of this Underwriting Agreement pursuant to this Section 7
shall be without liability of any party to any other party other than as
provided in Sections 8 and 12 hereof.
8. Default of Underwriter. If the Underwriter defaults in its obligation
to purchase the Offered Securities as provided in this Underwriting Agreement
and the aggregate principal amount of the Offered Securities with respect to
which such default occurs is more than ten percent of the aggregate principal
amount, notional amount or Stated Amount, as applicable, of such Offered
Securities, as the case may be, and arrangements satisfactory to the
Underwriter and the Company for the purchase of such Offered Securities by
other persons are not made within 36 hours after any such default, this
Underwriting Agreement will terminate without liability on the part of the
Company except for the expenses to be paid or reimbursed by the Company
pursuant to Section 11 hereof and except for the provisions of Sections 14
hereof. As used in this Underwriting Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section 8.
9. Expenses. The Company agrees with the Underwriter that: (a) whether or
not the transactions contemplated in this Underwriting Agreement are
consummated or this Underwriting Agreement is terminated, the Company will pay
all fees and expenses incident to the performance of its obligations under this
Underwriting Agreement, including but not limited to, (i) the Commission's
registration fee, (ii) the expenses of printing and distributing this
Underwriting Agreement and any related underwriting documents, the Registration
Statement, any preliminary prospectus, the Prospectus Supplement, any
amendments or supplements to the Registration Statement or the Prospectus
Supplement, and any Blue Sky memorandum or legal investment survey and any
supplements thereto, (iii) fees and expenses of rating agencies, accountants
and counsel for the Company, (iv) the expenses referred to in ____________
hereof, and (v) all miscellaneous expenses referred to in _______ of the
Registration Statement; (b) all out-of-pocket expenses, including counsel fees,
disbursements and expenses, reasonably incurred by the Underwriter in
connection with investigating, preparing to market and marketing the Offered
Securities and proposing to purchase and purchasing the Offered Securities
under this Underwriting Agreement will be borne and paid by the Company if this
Underwriting Agreement is terminated by the Company pursuant to Section 10
hereof or by the Underwriter on account of the failure, refusal or inability on
the part of the Company to perform all obligations and satisfy all conditions
on the part of the Company to be performed or satisfied hereunder; and (c) the
Company will pay the cost of preparing the certificates for the Offered
Securities.
Except as otherwise provided in this Section 9, the Underwriter agrees to
pay all of its expenses in connection with investigating, preparing to market
and
19
<PAGE>
marketing the Offered Securities and proposing to purchase and purchasing the
Offered Securities under this Underwriting Agreement, including the fees and
expenses of their counsel and any advertising expenses incurred by it in making
offers and sales of the Offered Securities.
10. If the sale of the Offered Securities provided/or herein is not
consummated because any condition to the obligation of the Underwriter set
forth in Section 2 is not satisfied or because of any refusal, inability or
failure on the part of the Company to perform any agreement herein or comply
with any provision hereof, other than by reason of a defendant by the
Underwriter, the Company will reimburse the Underwriter, upon demand, for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel
that shall have been incurred by it in connection with the proposed offering of
the Offered Securities.
11. Notices. All communications hereunder will be in writing and effective
only on receipt, and, if sent to the Underwriter, will be mailed, delivered or
telegraphed and confirmed to the Company at _______ or if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at One Seaport
Plaza - 30th Floor, New York, New York 10292, attention: David Rodgers.
12. Successors. This Underwriting Agreement shall inure to the benefit of
and shall be binding upon the Underwriter, the Company and their respective
successors and legal representatives, and nothing expressed or mentioned herein
on in this Underwriting Agreement is intended or shall be construed to give any
other person any legal or equitable right, remedy or claim under or in respect
of this Underwriting Agreement, or any provisions herein contained, the
Underwriting Agreement and all conditions and provisions hereof being intended
to be and being for the sole and exclusive benefit of such persons and for the
benefit of no other person except that (i) the representations and warranties
of the Company and the Servicer contained herein or in this Underwriting
Agreement shall also be for the benefit of any person or persons who controls
or control any Underwriter within the meaning of Section 15 of the 1933 Act,
and (ii) the indemnities by the Underwriter shall also be for the benefit of
the directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of Section 15 of the 1933 Act. No purchaser of the Offered
Securities from the Underwriter shall be deemed a successor because of such
purchase. This Underwriting Agreement and each Underwriting Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instruments.
13. Applicable Law; Counterparts. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. This Agreement
may be executed in any number of counterparts, each of which shall for all
purposes be deemed to be an original and all of which shall together constitute
but one and the same instrument.
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<PAGE>
14. Time of the Essence. Time shall be of the essence of each Underwriting
Agreement.
If the foregoing is in accordance with your understanding, please sign and
return two counterparts hereof.
Very truly yours,
PRUDENTIAL SECURITIES SECURED
FINANCING CORPORATION
By
----------------------------------------
Name:
Title:
Accepted as of The date hereof:
PRUDENTIAL SECURITIES
INCORPORATED
By
----------------------------------
Name:
Title:
21
<PAGE>
SCHEDULE I
Title of Offered Securities:
Prudential Securities Secured Financing Corporation Commercial Mortgage
Pass-Through Certificates, Series __________, Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D, Class E and Class F.
Terms and Conditions:
Specified funds for payment of purchase price:
Wire transfer of immediately available Federal Funds.
Required Rating:
As described in the Prospectus Supplement.
Time of Delivery:
_________________ at _____ A.M., New York City time.
Closing Location:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022
Names and address of Underwriter:
Address for Notices, etc.: Prudential Securities Inc.
One Seaport Plaza
New York, New York 10292
I-1
<PAGE>
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION
DEPOSITOR
,
SERVICER
,
SPECIAL SERVICER
,
TRUSTEE
and
,
FISCAL AGENT
POOLING AND SERVICING AGREEMENT
Dated as of
Commercial Mortgage Pass-Through Certificates
Series
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms................................................................. 3
SECTION 1.2. Certain Calculations.......................................................... 39
SECTION 1.3. Certain Constructions......................................................... 40
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.1. Conveyance and Assignment of Mortgage Loans;.................................. 41
SECTION 2.2. Acceptance by the Custodian and the Trustee................................... 45
SECTION 2.3. Representations and Warranties of the Depositor............................... 47
SECTION 2.4. Representations, Warranties and Covenants of the
Servicer and the Special Servicer............................................. 51
SECTION 2.5. Execution and Delivery of Certificates; Issuance of
Lower-Tier Regular Interests.................................................. 54
SECTION 2.6. Miscellaneous REMIC Provisions................................................ 54
SECTION 2.7. Documents Not Delivered to Custodian.......................................... 55
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.1. Servicer to Act as Servicer; Special Servicer to Act as
Special Servicer; Administration of the Mortgage
Loans......................................................................... 56
SECTION 3.2. Liability of the Servicer..................................................... 59
SECTION 3.3. Collection of Certain Mortgage Loan Payments.................................. 60
SECTION 3.4. Collection of Taxes, Assessments and Similar Items............................ 60
SECTION 3.5. Collection Account; Distribution Account...................................... 62
SECTION 3.6. Permitted Withdrawals from the Collection Account............................. 63
SECTION 3.7. Investment of Funds in the Collection Account, the
Distribution Account and the Reserve Accounts................................. 65
SECTION 3.8. Maintenance of Insurance Policies and Errors and
Omissions and Fidelity Coverage............................................... 67
SECTION 3.9. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.................................................................... 70
SECTION 3.10. Realization Upon Mortgage Loans............................................... 72
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SECTION 3.11. Trustee to Cooperate; Release of Mortgage Files............................... 76
SECTION 3.12. Servicing Compensation and Trustee Fees....................................... 77
SECTION 3.13. Reports to the Trustee; Collection Account Statements......................... 79
SECTION 3.14. Annual Statement as to Compliance............................................. 79
SECTION 3.15. Annual Independent Public Accountants' Servicing
Report........................................................................ 80
SECTION 3.16. Access to Certain Documentation............................................... 80
SECTION 3.17. Title and Management of REO Properties........................................ 81
SECTION 3.18. Sale of Specially Serviced Mortgage Loans and REO
Properties.................................................................... 84
SECTION 3.19. Inspections................................................................... 86
SECTION 3.20. Available Information and Notices............................................. 86
SECTION 3.21. Reserve Accounts.............................................................. 88
SECTION 3.22. Property Advances............................................................. 88
SECTION 3.23. Appointment of Special Servicer............................................... 89
SECTION 3.24. Transfer of Servicing Between Servicer and Special
Servicer; Record Keeping...................................................... 89
SECTION 3.25. Adjustment of Servicing Compensation in Respect of
Prepayment Interest Shortfalls................................................ 91
SECTION 3.26. Extension Advisor............................................................. 92
ARTICLE IV
DISTRIBUTIONS TO CERTIFICATEHOLDERS
SECTION 4.1. Distributions................................................................. 93
SECTION 4.2. Statements to Rating Agencies and Certificateholders;
Available Information; Information Furnished to
Financial Market Publisher....................................................109
SECTION 4.3. Compliance with Withholding Requirements......................................112
SECTION 4.4. REMIC Compliance..............................................................112
SECTION 4.5. Imposition of Tax on the Trust Fund...........................................114
SECTION 4.6. Remittances; P&I Advances.....................................................115
ARTICLE V
THE CERTIFICATES
SECTION 5.1. The Certificates..............................................................118
SECTION 5.2. Registration, Transfer and Exchange of Certificates...........................119
SECTION 5.3. Book-Entry Certificates.......................................................124
SECTION 5.4. Mutilated, Destroyed, Lost or Stolen Certificates.............................125
SECTION 5.5. Appointment of Paying Agent...................................................126
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SECTION 5.6. Access to Certificateholders' Names and Addresses.............................126
SECTION 5.7. Actions of Certificateholders.................................................127
ARTICLE VI
THE DEPOSITOR, THE SERVICER AND THE SPECIAL SERVICER
SECTION 6.1. Liability of the Depositor, the Servicer and the Special
Servicer......................................................................128
SECTION 6.2. Merger or Consolidation of the Servicer and Special
Servicer......................................................................128
SECTION 6.3. Limitation on Liability of the Depositor, the Servicer
and Others....................................................................128
SECTION 6.4. Limitation on Resignation of the Servicer and of the
Special Servicer..............................................................129
SECTION 6.5. Rights of the Depositor and the Trustee in Respect of
the Servicer and the Special Servicer.........................................130
ARTICLE VII
DEFAULT
SECTION 7.1. Events of Default.............................................................131
SECTION 7.2. Trustee to Act; Appointment of Successor......................................133
SECTION 7.3. Notification to Certificateholders............................................134
SECTION 7.4. Other Remedies of Trustee.....................................................134
SECTION 7.5. Waiver of Past Events of Default; Termination.................................135
ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.1. Duties of Trustee.............................................................136
SECTION 8.2. Certain Matters Affecting the Trustee.........................................137
SECTION 8.3. Trustee Not Liable for Certificates or Mortgage Loans.........................139
SECTION 8.4. Trustee May Own Certificates..................................................141
SECTION 8.5. Payment of Trustee's Fees and Expenses;
Indemnification...............................................................141
SECTION 8.6. Eligibility Requirements for Trustee..........................................142
SECTION 8.7. Resignation and Removal of the Trustee........................................143
SECTION 8.8. Successor Trustee.............................................................144
SECTION 8.9. Merger or Consolidation of Trustee............................................145
SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.................................145
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SECTION 8.11. Authenticating Agent..........................................................147
SECTION 8.12. Appointment of Custodians.....................................................147
SECTION 8.13. Fiscal Agent Appointed; Concerning the Fiscal Agent...........................148
ARTICLE IX
TERMINATION
SECTION 9.1. Termination...................................................................149
SECTION 9.2. Additional Termination Requirements...........................................153
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Counterparts..................................................................155
SECTION 10.2. Limitation on Rights of Certificateholders....................................155
SECTION 10.3. Governing Law.................................................................156
SECTION 10.4. Notices.......................................................................156
SECTION 10.5. Severability of Provisions....................................................158
SECTION 10.6. Notice to the Depositor and Each Rating Agency................................158
SECTION 10.7. Amendment.....................................................................159
SECTION 10.8. Confirmation of Intent........................................................161
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EXHIBITS
Exhibit A-1 Form of Class Certificate
Exhibit A-2 Form of Class Certificate
Exhibit A-3 Form of Class Certificate
Exhibit A-4 Form of Class Certificate
Exhibit A-5 Form of Class Certificate
Exhibit A-6 Form of Class Certificate
Exhibit A-7 Form of Class Certificate
Exhibit A-8 Form of Class Certificate
Exhibit A-9 Form of Class Certificate
Exhibit A-10 Form of Class Certificate
Exhibit A-11 Form of Class Certificate
Exhibit A-12 Form of Class Certificate
Exhibit A-13 Form of Class Certificate
Exhibit A-14 Form of Class Certificate
Exhibit B Mortgage Loan Schedule
Exhibit C-1 Form of Transferee Affidavit
Exhibit C-2 Form of Transferor Letter
Exhibit D-1 Form of Investment Representation Letter
Exhibit D-2 Form of ERISA Representation Letter
Exhibit E Form of Request for Release
Exhibit F Form of Custodial Agreement
Exhibit G Form of Mortgage Loan Purchase and Sale Agreement
Exhibit H Privately Placed Securities Legend
</TABLE>
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Pooling and Servicing Agreement, dated as of
among Prudential Securities Secured Financing Corporation, as
Depositor, , as Servicer, , as Special Servicer,
, as Trustee and Custodian, and , as Fiscal
Agent of the Trustee.
PRELIMINARY STATEMENT:
(Terms used but not defined in this Preliminary Statement shall have the
meanings specified in Article I hereof)
The Depositor intends to sell pass-through certificates to
be issued hereunder in multiple classes which in the aggregate will evidence
the entire beneficial ownership interest in the Trust Fund consisting
primarily of the Mortgage Loans. As provided herein, the Trustee will elect
that the Trust Fund be treated for federal income tax purposes as two separate
real estate mortgage investment conduits (each a "REMIC" or, in the
alternative, the "Lower-Tier REMIC" and the "Upper-Tier REMIC," respectively).
The Class , Class , Class , Class , Class , Class , Class
, Class , Class , Class , Class and Class
Certificates constitute "regular interests" in the Upper-Tier REMIC and
the Class __ Certificates are the sole class of "residual interest" in the
Upper-Tier REMIC for purposes of the REMIC Provisions. The Class Certificates
are the sole class of "residual interest" in the Lower-Tier REMIC for purposes
of the REMIC Provisions. There are also ten classes of uncertificated
Lower-Tier Regular Interests issued under this Agreement (the Class
Interests), each of which will constitute a regular interest in the Lower-Tier
REMIC. All such Lower-Tier Regular Interests will be held by the Trustee as
assets of the Upper-Tier REMIC.
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The following table sets forth the designation and aggregate
initial Certificate Balance (or, with respect to the Class ___ and Class ___
Certificates, the Class ___ Notional Balance and the Class ___ Notional Balance,
respectively) for each Class of Certificates comprising interests in the
Upper-Tier REMIC.
Certificate Balance
Class or Notional Balance
----- -------------------
(1) The Class __ and Class __ Certificates are not denominated in
Certificate Balance and accordingly will not receive principal
distributions. The Class __ and Class __ Certificates have an initial
Class __ Notional Balance and an initial Class __ Notional Balance,
respectively, in the amounts shown in the above table.
The initial Certificate Balance of each of the Class __ and
Class __ Certificates will be zero. The Certificate Balance of any class of
Certificates outstanding at any time represents the maximum amount which
holders thereof are entitled to receive as distributions allocable to
principal from the cash flow on the Mortgage Loans and the other assets in the
Trust Fund.
As of the Cut-off Date, the Mortgage Loans have an aggregate
Scheduled Principal Balance equal to approximately $ .
In consideration of the mutual agreements herein contained,
the Depositor, the Servicer, the Special Servicer, the Trustee and the Fiscal
Agent agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.1. Defined Terms.
Whenever used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article.
"Advance": Any P&I Advance or Property Advance.
"Advance Interest Amount": The sum for all Mortgage Loans as
to which any Advance remains unreimbursed of interest at the related Advance
Rate on the amount of any P&I Advances and Property Advances for which the
Servicer, the Trustee or the Fiscal Agent, as applicable, has not been paid or
reimbursed for the number of days from the date on which such Advance was made
or, if interest has been previously paid on such Advance, from the date on
which interest was last paid, through the date of payment or reimbursement of
the related Advance (which in no event shall be later than the Determination
Date following the date on which funds are available to reimburse such Advance
with interest thereon at the Advance Rate).
"Advance Rate": A per annum rate equal to the Prime Rate (as
published in The Wall Street Journal, or, if The Wall Street Journal is no
longer published, The New York Times, from time to time).
"Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such
specified Person. For the purposes of this definition, "control" when used
with respect to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. The
Trustee may obtain and rely on an Officer's Certificate of the Servicer, the
Special Servicer or the Depositor to determine whether any Person is an
Affiliate of such party.
"Aggregate Certificate Balance": As defined in Section
9.1(d)(i).
"Agreement": This Pooling and Servicing Agreement and all
amendments hereof and supplements hereto.
"Annual Debt Service": For any Mortgage Loan, the current
annual debt service (including interest allocable to payment of the Servicing
Fee) payable with respect to such Mortgage Loan during the 12-month period
commencing on the Cut-off Date (assuming no principal prepayments occur).
"Anticipated Loss": As defined in Section 4.6(c).
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"Anticipated Termination Date": Any Distribution Date on
which it is anticipated that the Trust Fund will be terminated pursuant to
Section 9.1(c) or Section 9.1(d).
"Applicable Monthly Payment": As defined in Section 4.6(a).
"Applicant": As defined in Section 5.6(a).
"Appraised Value": For each of the Mortgaged Properties, the
appraised value of such property as determined by an appraisal thereof,
conforming to MAI standards, made not more than one year prior to the
origination date of the related Mortgage Loan.
"Assignment of Leases, Rents and Profits": With respect to
any Mortgaged Property, any assignment of leases, rents and profits or similar
agreement executed by the Borrower, assigning to the mortgagee all of the
income, rents and profits derived from the ownership, operation, leasing or
disposition of all or a portion of such Mortgaged Property, in the form which
was duly executed, acknowledged and delivered by the Borrower, as amended,
modified, renewed or extended through the date hereof and from time to time
hereafter.
"Assignment of Mortgage": An assignment of mortgage without
recourse, notice of transfer or equivalent instrument, in recordable form,
which is sufficient under the laws of the jurisdiction in which the related
Mortgaged Property is located to reflect of record the sale of the related
Mortgage, which assignment, notice of transfer or equivalent instrument may be
in the form of one or more blanket assignments covering Mortgages encumbering
Mortgaged Properties located in the same jurisdiction, if permitted by law and
acceptable for recording; provided, however, that none of the Trustee, the
Custodian, the Special Servicer or the Servicer shall be responsible for
determining whether any assignment is legally sufficient or in recordable
form.
"Assumed Scheduled Payment": With respect to any Mortgage
Loan that is delinquent in respect of its Balloon Payment (including any REO
Mortgage Loan as to which the Balloon Payment would have been past due), an
amount equal to the sum of (a) the principal portion of the Monthly Payment
that would have been due on such Mortgage Loan on a Due Date that falls on or
after the date on which such Balloon Payment was due, based on the original
amortization schedule thereof, assuming such Balloon Payment had not become
due, after giving effect to any modification, and (b) interest at the
applicable Net Mortgage Rate on the principal balance that would have remained
on such Mortgage Loan after giving effect to deemed principal payments
pursuant to clause (a) hereof on prior Due Dates.
"Assumption Fees": Any fees collected by the Servicer or the
Special Servicer in connection with an assumption or modification of a
Mortgage Loan or substitution of a Borrower thereunder permitted to be
executed under the provisions of Section 3.1, Section 3.9 or Section 3.10.
"Auction Agent": An Independent financial advisory or
investment banking or investment brokerage firm nationally recognized in the
field of real estate financial analysis and auction procedures appointed by
the Trustee pursuant to Section 9.1(d).
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"Auction Fees": As defined in Section 9.1(d)(v).
"Auction Procedures": As defined in Section 9.1(d)(vi).
"Auction Proceeds Distribution Date": The third Distribution
Date following an Auction Valuation Date, or such later Distribution Date
determined by the Auction Agent.
"Auction Valuation Date": Each of (i) the Distribution Date
occurring in September of each year from and including __________ and (ii) any
Business Day on which the Trustee receives an unsolicited bona fide offer to
purchase all (but not less than all) of the Mortgage Loans.
"Authenticating Agent": Any authenticating agent appointed
by the Trustee pursuant to Section 8.11.
"Balloon Payment": With respect to each Mortgage Loan, the
scheduled payment of principal and interest due on the Maturity Date of such
Mortgage Loan which, pursuant to the related Note, is equal to the entire
remaining principal balance of such Mortgage Loan, plus accrued interest
thereon.
"Borrower": With respect to each Mortgage Loan, any obligor
on any related Note (or, in the case of the Interest, the
Certificate, to the extent applicable).
"Book-Entry Certificate": Any Certificate registered in the
name of the Securities Depository or its nominee.
"Business Day": Any day other than a Saturday, a Sunday or a
day on which banking institutions in the States of New York, Illinois or
__________ are authorized or obligated by law, executive order or governmental
decree to be closed.
"Cash Deposit": An amount equal to all cash payments of
principal and interest received by the Mortgage Loan Seller in respect of the
Mortgage Loans prior to or on the Closing Date which are due after the Cut-off
Date, which amount is to be deposited with the Trustee by the Depositor
pursuant to Section 2.1.
"Certificate": Any Class ___ Certificate issued,
authenticated and delivered hereunder.
"Certificate Balance": With respect to any Class of Regular
Certificates (other than the Class ___ and Class ___ Certificates) (a) on or
prior to the first Distribution Date, an amount equal to the aggregate initial
Certificate Balance of such Class, as specified in the Preliminary Statement
hereto, and (b) as of any date of determination after the first Distribution
Date, the Certificate Balance of such Class of Certificates on the Distribution
Date immediately prior to such date of determination, after application of the
distributions and Realized Losses made thereon on such prior Distribution Date;
and with respect to any Lower-
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<PAGE>
Tier Regular Interest, (a) on or prior to the first Distribution Date, an
amount equal to the Certificate Balance of the Related Certificates, and (b) as
of any date of determination after the first Distribution Date, the Certificate
Balance of such Lower-Tier Regular Interest on the Distribution Date
immediately prior to such date of determination, after application of
distributions in respect of principal and Realized Losses made thereon on such
prior Distribution Date. The Class ___ and Class ___ Certificates have no
Certificate Balances.
"Certificate Owner": With respect to a Book-Entry
Certificate, the Person who is the beneficial owner of such Certificate as
reflected on the books of the Securities Depository or on the books of a
Securities Depository Participant or on the books of an indirect participating
brokerage firm for which a Securities Depository Participant acts as agent.
"Certificate Register" and "Certificate Registrar": The
register maintained and the registrar appointed pursuant to Section 5.2(a).
"Certificateholder": A Person whose name is registered in
the Certificate Register; provided, however, that any Certificate held or
beneficially owned by the Depositor, the Servicer, the Trustee, a Manager or a
Borrower or any Person known to a Responsible Officer of the Certificate
Registrar to be an Affiliate of any thereof shall be deemed not to be
outstanding and the Voting Rights to which it is entitled shall not be taken
into account in determining whether the requisite percentage of Voting Rights
necessary to effect any consent has been obtained (unless such consent is to
an action which would materially adversely affect in any material respect the
interests of the Certificateholders of any Class, while the Servicer or any
Affiliate thereof is the holder of Certificates aggregating not less than
_____% of the Percentage Interest of any such Class). All references herein to
"Holders" or "Certificateholders" shall reflect the rights of Certificate
Owners as they may indirectly exercise such rights through the Securities
Depository and the Securities Depository Participants, except as otherwise
specified herein.
"Class": With respect to Certificates or Lower-Tier Regular
Interests, all of the Certificates or Lower-Tier Regular Interests bearing the
same alphabetical and numerical class designation.
"Class ___ Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit ___ hereto.
"Class ___ Pass-Through Rate": A per annum rate equal to
%.
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"Class ___ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on
behalf of the Depositor in substantially the form set forth in Exhibit ___
hereto.
"Class ___ Pass-Through Rate": A per annum rate equal to
%.
"Class ____ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on behalf
of the Depositor in substantially the form set forth in Exhibit ___ hereto.
"Class ____ Excess Interest": With respect to any
Distribution Date, an amount equal to the Class ___ Pass-Through Rate
multiplied by the Class ___ Notional Balance. Class ___ Excess Interest
represents a portion of the interest payments on the Interest.
"Class _____ Notional Balance": As of any date of
determination, an amount equal to the sum of (i) the Class ___ Notional
Component ___ and (ii) the Certificate Balances of the Class ___ Certificates,
the Class ___ Certificates, the Class ___ Certificates, the Class ___
Certificates, the Class ___ Certificates, the Class ___ Certificates, the
Class ___ Certificates and the Class ___ Certificates.
"Class ____ Notional Component A": As of any date of
determination, an amount equal to the sum of the Certificate Balances of the
Class _______ Certificates and the Class ___ Certificates.
"Class ____ Pass-Through Rate": With respect to any Interest
Accrual Period, a per annum rate equal to the excess of the Weighted Average
Net Mortgage Rate over the weighted averages of the Pass-Through Rates of the
P&I Certificates (weighted in each case on the basis of a fraction equal to the
Certificate Balance of each such Class of Certificates divided by the sum
_____ of the Certificate Balances of the P&I Certificates and the Class ___
Certificates as of the first day of such Interest Accrual Period) and the
Class ___ Pass-Through Rate (weighted on the basis of a fraction equal to the
Class ___ Notional Balance divided by the sum of the Certificate Balances of
the P&I Certificates and the Class ___ Certificates, each as of the first day
of such Interest Accrual Period). For purposes of this definition, the
Pass-Through Rates of the Class ___, Class ___ and Class ___ Certificates
shall be equal to the Weighted Average Net Mortgage Rate.
"Class _____ Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.1.
"Class _____ Interest": A regular interest in the Lower-Tier
REMIC entitled to monthly distributions payable thereto pursuant to Section
4.1.
"Class ___ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on
behalf of the Depositor in substantially the form set forth in Exhibit ____
hereto.
"Class ___ Pass-Through Rate": A per annum rate equal to
%
"Class ___ Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to
Section 4.1.
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"Class __ Certificate": Any one of the Certificates executed
and authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit ___ hereto.
"Class ___ Pass-Through Rate": A per annum rate equal to
___%.
"Class ___ Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to
Section 4.1.
"Class ___ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on
behalf of the Depositor in substantially the form set forth in Exhibit ___
hereto.
"Class __ Pass-Through Rate": A per annum rate equal to
_____%.
"Class ___ Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to
Section 4.1.
"Class ___ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on
behalf of the Depositor in substantially the form set forth in Exhibit ___
hereto.
"Class ___ Pass-Through Rate": With respect to any Interest
Accrual Period, a per annum rate equal to ___%.
"Class ___ Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to
Section 4.1.
"Class ___ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on
behalf of the Depositor in substantially the form set forth in Exhibit ___
hereto.
"Class ___ Pass-Through Rate": With respect to any Interest
Accrual Period, a per annum rate equal to the higher of (i) the Weighted
Average Net Mortgage Rate and (ii) ____%
"Class ___ Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to
Section 4.1.
"Class ___ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on
behalf of the Depositor in substantially the form set forth in Exhibit hereto.
"Class ___ Pass-Through Rate": With respect to any Interest
Accrual Period, a per annum rate equal to the higher of (i) the Weighted
Average Net Mortgage Rate and (ii) ____%.
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"Class ___ Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to
Section .
"Class ___ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or the Authenticating Agent on
behalf of the Depositor in substantially the form set forth in Exhibit hereto.
"Class ___ Pass-Through Rate": With respect to any Interest
Accrual Period, a per annum rate equal to the higher of (i) the Weighted
Average Net Mortgage Rate and (ii) .
"Class ___ Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to
Section 4.1.
"Class Interest Distribution Amount": With respect to any
Distribution Date and any of the Class ____ Certificates, interest for the
related Interest Accrual Period at the applicable Pass-Through Rate for such
Class of Certificates for such Interest Accrual Period on the Certificate
Balance of such Class. With respect to any Distribution Date and the Class
____ Certificates, (a) for any Distribution Date occurring on or prior to the
EC Maturity Date, the Class ____ Excess Interest and, (b) thereafter, zero.
With respect to the Class ____ Certificates, zero. With respect to any
Distribution Date and the Class Certificates, an amount equal to the product
of the Class Pass-Through Rate and the Class ____ Notional Balance. The Class
Interest Distribution Amount of the Class ____ Certificates represents a
specified portion equal to ____% of the interest payments on the Class ____
Interest. For purposes of determining any Class Interest Distribution Amount,
any distributions in reduction of Certificate Balance, any reductions of
Certificate Balance (and any resulting reductions in Notional Balance) as a
result of allocations of Realized Losses on the Distribution Date occurring in
such Interest Accrual Period shall be deemed to have been made as of the first
day of such Interest Accrual Period. Notwithstanding the foregoing, the Class
Interest Distribution Amount for each Class of Certificates otherwise
calculated as described above shall be reduced by such Class pro rata share of
any Uncovered Prepayment Interest Shortfall for such Distribution Date (pro
rata according to each respective Class' Class Interest Distribution Amount
determined without regard to this sentence).
"Class Interest Shortfall": On any Distribution Date for any
Class of Certificates, the excess, if any, of the Class Interest Distribution
Amount for such Class over the amount of interest actually distributed in
respect of such Class Interest Distribution Amount to the Holders of such
Certificates pursuant to Section 4.1(b) on such Distribution Date.
"Class ___ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or Authenticating Agent on behalf of
the Depositor in substantially the form set forth in Exhibit hereto.
"Class ___ Certificate": Any one of the Certificates
executed and authenticated by the Trustee or Authenticating Agent on behalf of
the Depositor in substantially the form set forth in Exhibit hereto.
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"Class ___ Notional Balance": As of any date of
determination, an amount equal to the Certificate Principal Balance of the
Class Certificates.
"Class ___ Pass-Through Rate": With respect to any Interest
Accrual Period, a per annum rate equal to the Weighted Average Net Mortgage
Rate.
"Class ___ Interest": A regular interest in the Lower-Tier
REMIC entitled to the monthly distributions payable thereto pursuant to
Section 4.1.
"Class ___ Certificate": Any Certificate executed and
authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit ____ hereto. The
Class __ Certificates have no Pass-Through Rate or Certificate Balance.
"Class ___ Certificate": Any Certificate executed and
authenticated by the Trustee or the Authenticating Agent on behalf of the
Depositor in substantially the form set forth in Exhibit ___ hereto. The Class
__ Certificates have no Pass-Through Rate or Certificate Balance.
"Closing Date": .
"Code": The Internal Revenue Code of 1986, as amended from
time to time, any successor statute thereto, and any temporary or final
regulations of the United States Department of the Treasury promulgated
pursuant thereto.
"Collection Account": The segregated account or accounts
created and maintained by the Servicer pursuant to Section 3.5(a), which shall
be entitled " ____ , as Trustee, in trust for Holders of Prudential Securities
Secured Financing Corporation, Commercial Mortgage Pass-Through Certificates,
Series __________ , Collection Account" and which shall be an Eligible Account.
"Collection Period": With respect to any Distribution Date
and any Mortgage Loan other than the ______ Interest, the period beginning on
the first day following the Determination Date in the month preceding the
month in which such Distribution Date occurs (or, in the case of the
Distribution Date occurring in _____ , on the day after the Cut-off Date) and
ending on the Determination Date in the month in which such Distribution Date
occurs, and with respect to any Distribution Date and the _____ Interest, the
period beginning on the first day following the remittance date under the
Prior Pooling and Servicing Agreement in the month preceding the month in
which such Distribution Date occurs (or, in the case of the Distribution Date
occurring in _____ , on the day after the Cut-off Date) and ending on the
remittance date under the prior Pooling and Servicing Agreement in the month
in which such Distribution Date occurs.
"Commission": The Securities and Exchange Commission of the
United States of America.
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"Condemnation Proceeds": Any amount (other than Insurance
Proceeds) received in connection with the taking of a Mortgaged Property by
exercise of the power of eminent domain or condemnation.
"Corporate Trust Office": The principal office of the
Trustee located at _________________________________________________________,
Attention: Asset Backed Securities Trust Services Dept., or the principal
trust office of any successor trustee qualified and appointed pursuant to
Section 8.8.
"Custodial Agreement": The Custodial Agreement, if any, in
effect from time to time between the Custodian named therein, the Servicer and
the Trustee, substantially in the form of Exhibit __ hereto, as the same may
be amended or modified from time to time in accordance with the terms thereof.
"Custodian": Any Custodian appointed pursuant to Section
8.12 and, unless the Trustee is Custodian, named pursuant to any Custodial
Agreement. The Custodian may (but need not) be the Trustee or the Servicer or
any Affiliate of the Trustee or the Servicer, but may not be the Depositor or
any Affiliate of the Depositor.
"Cut-off Date": _____________________ ; provided, however,
that references to the principal balance of Mortgage Loans No. _______________
and _______________ (or other terms derived in part by reference to the
principal of balance of such Mortgage Loans) as of the Cut-off Date shall refer
to the principal balance of such Mortgage Loans as of __________ references to
the principal balance of Mortgage Loans No. _________________ , ___________ and
____________________ (or other terms derived in part by reference to the
principal of balance of such Mortgage Loans) as of the Cut-off Date shall refer
to the principal balance of such Mortgage Loan as of _____________.
"Debt Service Coverage Ratio": With respect to any Mortgage
Loan, (a) the Underwritten Cash Flow for the related Mortgaged Property,
divided by (b) the Annual Debt Service for such Mortgage Loan.
"Default Interest": With respect to any Mortgage Loan,
interest accrued on such Mortgage Loan at the excess of the Default Rate over
the Mortgage Rate.
"Default Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan following any
event of default on such Mortgage Loan, including a default in the payment of
a Monthly Payment or a Balloon Payment, as such rate is set forth in the
Mortgage Loan Schedule.
"Deficient Auction Bid": As defined in Section 9.1(d)(iii).
"Definitive Certificate": As defined in Section 5.3(a).
"Depositor": Prudential Securities Secured Financing
Corporation, a Delaware corporation and its successors and assigns.
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"Determination Date": The ___ day of any month, or if such
____ day is not a Business Day, the Business Day immediately following such
____ day, commencing .
"Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof that are not
customarily provided to tenants in connection with the rental of space for
occupancy only within the meaning of Treasury Regulations Section
1.512(h)-1(c)(5), the management or operation of such REO Property, the
holding of such REO Property primarily for sale to customers or any use of
such REO Property in a trade or business conducted by the Trust Fund other
than through an Independent Contractor; provided, however, that the Servicer,
on behalf of the Trust Fund (or the Special Servicer on behalf of the Trust
Fund), shall not be considered to Directly Operate an REO Property solely
because the Servicer, on behalf of the Trust Fund (or the Special Servicer on
behalf of the Trust Fund), establishes rental terms, chooses tenants, enters
into or renews leases, deals with taxes and insurance, or makes decisions as
to repairs or capital expenditures with respect to such REO Property.
"Discount Rate": The rate determined by the Trustee in
connection with distributions pursuant to Section 4.1(c)(I) to be the rate
(interpolated and rounded to the nearest one-thousandth of a percent, if
necessary) in the secondary market on the United States Treasury security with
a maturity equal to the then-computed weighted average life of the related
Class of Certificates (rounded to the nearest month) (without taking into
account the related prepayment and assuming (i) no further prepayments on the
Mortgage Loans and (ii) no delinquencies or defaults with respect to payments
on the Mortgage Loans) plus ____% per annum.
"Disposition Fee": With respect to any Specially Serviced
Mortgage Loan or REO Property which is sold or transferred or otherwise
liquidated, an amount equal to the product of (I) the excess, if any of (a)
the Liquidation Proceeds of such Specially Serviced Mortgage Loan or REO
Property minus (b) any broker's commission and related brokerage referral
fees, times (II) (a) ___%, if such sale or liquidation occurs prior to ___
months following the date on which the related Mortgage Loan initially became
a Specially Serviced Mortgage Loan, or (b) ___%, if such sale or liquidation
occurs upon or after the expiration of such ___ -month period.
"Disqualified Non-U.S. Person": With respect to a Class ___
or Class ___ Certificate, any Non-U.S. Person or agent thereof other than (i)
a Non-U.S. Person that holds the Class ___ or Class ___ Certificate in
connection with the conduct of a trade or business within the United States
and has furnished the transferor and the Certificate Registrar with an
effective IRS Form 4224 or (ii) a Non-U.S. Person that has delivered to both
the transferor and the Certificate Registrar an Opinion of Counsel to the
effect that the transfer of the Class ___ or Class ___ Certificate to it is in
accordance with the requirements of the Code and the regulations promulgated
thereunder and that such transfer of the Class ___ or Class ___ Certificate
will not be disregarded for federal income tax purposes.
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"Disqualified Organization": Either (a) the United States, a
State or any political subdivision thereof, any possession of the United
States, or any agency or instrumentality of any of the foregoing (other than
an instrumentality that is a corporation if all of its activities are subject
to tax and a majority of its board of directors is not selected by any such
governmental unit), (b) a foreign government, International Organization or
agency or instrumentality of either of the foregoing, (c) an organization that
is exempt from tax imposed by Chapter 1 of the Code (including the tax imposed
by Code Section 511 on unrelated business taxable income) on any excess
inclusions (as defined in Code Section 860E(c)(1)) with respect to the Class
__ or Class __ Certificates (except certain farmers' cooperatives described in
Code Section 521), (d) rural electric and telephone cooperatives described in
Code Section 1381(a)(2), or (e) any other Person so designated by the
Certificate Registrar based upon an Opinion of Counsel to the effect that any
Transfer to such Person may cause the Upper-Tier REMIC or Lower-Tier REMIC to
fail to qualify as a REMIC at any time that the Certificates are outstanding.
The terms "United States," "State" and "International Organization" shall have
the meanings set forth in Code Section 7701 or successor provisions.
"Distribution Account": The segregated account or accounts
created and maintained as a separate trust account or accounts by the Trustee
pursuant to Section 3.5(b), which shall be entitled " , as Trustee, in trust
for Holders of Prudential Securities Secured Financing Corporation Commercial
Mortgage Pass-Through Certificates, Series _________ Distribution Account" and
which shall be an Eligible Account.
"Distribution Date": The ___ day of any month, or if such
___ day is not a Business Day, the Business Day immediately following such ___
day, commencing on .
"Due Date": With respect to any Collection Period and any
Mortgage Loan, the date on which scheduled payments are due on such Mortgage
Loan (without regard to grace periods), such date being for all Mortgage Loans
other than Mortgage Loan No. - ______________________and _____________________
the_____________________Interest the ____ day of each month, and for Mortgage
Loan No._______________________the ____ day of the month, and for the
Interest, the remittance date under Prior Pooling and Servicing Agreement.
" _________ ": Credit Rating Co., or its successor in
interest.
"Early Termination Notice Date": Any date as of which the
aggregate Scheduled Principal Balance of the Mortgage Loans remaining in the
__________ Trust Fund is less than __% of the aggregate Scheduled Principal
Balance of the Mortgage Loans as of the Cut-off Date.
"EC Maturity Date": __________________________ .
"Eligible Account": Either (i) a segregated account or
accounts maintained with a federally or state-chartered depository institution
or trust company, the long term unsecured debt obligations of which (or of
such institution's parent holding company) are assigned a rating by each
Rating Agency that is greater than or equal to the rating then assigned to the
Class of Certificates outstanding at the time of any deposit therein which has
the highest rating then
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assigned of any such outstanding Class or (ii) a segregated trust account or
accounts maintained with a federally or state-chartered depository institution
or trust company acting in its fiduciary capacity, having, in either case, a
combined capital and surplus of at least $______ and subject to supervision or
examination by federal or state authority, or otherwise confirmed in writing
by each of the Rating Agencies that the maintenance of such account, which may
be an account maintained with the Trustee or the Servicer, shall not, in and
of itself, result in a downgrading, withdrawal or qualification of the rating
then assigned by such Rating Agency to any Class of Certificates. Eligible
Accounts may bear interest.
"Eligible Investor": (i) A Qualified Institutional Buyer
that is purchasing Privately Placed Certificates for its own account or for
the account of a Qualified Institutional Buyer to whom notice is given that
the offer, sale or transfer is being made in reliance on Rule 144A promulgated
under the 1933 Act or (ii) with respect to Privately Placed Certificates other
than the Class __ and Class __ Certificates, an Institutional Accredited
Investor.
"Environmental Report": With respect to each Mortgaged
Property, the environmental audit report or reports delivered to the Mortgage
Loan Seller in connection with the purchase of the related Mortgage Loan from
the Originator of such Mortgage Loan.
"ERISA": The Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
"Escrow Account": As defined in Section 3.4(b).
"Escrow Payment": Any payment made by any Borrower to the
Servicer for the account of such Borrower for application toward the payment
of taxes, insurance premiums, assessments and similar items in respect of the
related Mortgaged Property and the payment of the Financial and Lease
Reporting Fee.
"Event of Default": As defined in Section 7.1.
"Extension Advisor": The Person who has the right to approve
the actions of the Special Servicer in granting extensions as set forth in
Section 3.26. shall serve as the initial Extension Advisor.
"Extension Advisory Fee": With respect to each Mortgage Loan
as to which an extension is requested after three successive extensions have
been granted in accordance with Section 3.10(a), _____% of the Scheduled
Principal Balance of such Mortgage Loan; provided that so long as the
____________ is the Extension Advisor the Extension Advisory Fee will be zero.
"FDIC": The Federal Deposit Insurance Corporation, or any
successor thereto.
"FHA": The Federal Housing Administration.
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"FHLMC": The Federal Home Loan Mortgage Corporation, or any
successor thereto.
"Final Recovery Determination": With respect to any REO
Mortgage Loan, Specially Serviced Mortgage Loan or Mortgage Loan subject to
repurchase by ________ or the Mortgage Loan Seller pursuant to Section 2.3(d)
or 2.3(e), the recovery of all Insurance Proceeds, Condemnation Proceeds,
Liquidation Proceeds, the related Repurchase Price and other payments or
recoveries (including proceeds of the final sale of any related REO Property)
which the Servicer, in its reasonable judgment as evidenced by a certificate
of a Servicing Officer delivered to the Trustee and the Custodian, expects to
be finally recoverable. The Servicer shall maintain records, prepared by a
Servicing Officer, of each Final Recovery Determination until the earlier of
(i) its termination as Servicer hereunder and the transfer of such records to
a successor servicer and (ii) five years following the termination of the
Trust Fund.
"Financial and Lease Reporting Fee": Any payment made by any
Borrower under the related Note as a deposit to ensure that such Borrower
furnishes to the mortgagee the required financial and leasing information on a
timely basis during the term of the related Mortgage Loan.
"Financial Market Publisher": Bloomberg Financial Service.
"Fiscal Agent":__________________, in its capacity as fiscal
agent of the Trustee, or its successor in interest, or any successor fiscal
agent appointed as herein provided.
" ": Investors Service, L.P., or its successor in
interest.
"FNMA": The Federal National Mortgage Association, or any
successor thereto.
"Hazardous Materials": Any dangerous, toxic or hazardous
pollutants, chemicals, wastes, or substances, including, without limitation,
those so identified pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., or any other
environmental laws now existing, and specifically including, without
limitation, asbestos and asbestos-containing materials, polychlorinated
biphenyls, radon gas, petroleum and petroleum products, urea formaldehyde and
any substances classified as being "in inventory", "usable work in process" or
similar classification which would, if classified as unusable, be included in
the foregoing definition.
"Holder": With respect to any Certificate, a
Certificateholder; with respect to any Lower-Tier Regular Interest, the
Trustee.
"Indemnified Party": As defined in Section 8.5(c).
"Independent": When used with respect to any specified
Person, any other Person who (i) does not have any direct financial interest,
or any material indirect financial interest, in any of the Manager, the
Depositor, the Servicer, the Special Servicer, any Borrower or any Affiliate
thereof, and (ii) is not connected with any such specified Person as an
officer,
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employee, promoter, underwriter, trustee, partner, director or Person performing
similar functions.
"Independent Contractor": Either (i) any Person that would
be an "independent contractor" with respect to the Trust Fund within the
meaning of Section 856(d)(3) of the Code if the Trust Fund were a real estate
investment trust (except that the ownership tests set forth in that section
shall be considered to be met by any Person that owns, directly or indirectly,
__% or more of any Class or __% or more of the aggregate value of all Classes
of Certificates), provided that the Trust Fund does not receive or derive any
income from such Person and the relationship between such Person and the Trust
Fund is at arm's length, all within the meaning of Treasury Regulations
Section 1.856-4(b)(5) (except that the Servicer shall not be considered to be
an Independent Contractor under the definition in this clause (i) unless an
Opinion of Counsel (obtained at the expense of the Servicer) addressed to the
Servicer and the Trustee has been delivered to the Trustee to the effect that
the Servicer meets the requirements of such definition) or (ii) any other
Person (including the Servicer) if the Servicer, on behalf of itself and the
Trustee, has received an Opinion of Counsel (obtained at the expense of the
party seeking to be deemed an Independent Contractor) to the effect that the
taking of any action in respect of any REO Property by such Person, subject to
any conditions therein specified, that is otherwise herein contemplated to be
taken by an Independent Contractor will not cause such REO Property to cease
to qualify as "foreclosure property" within the meaning of Section 860G(a)(8)
of the Code (determined without regard to the exception applicable for
purposes of Section 860D(a) of the Code) or cause any income realized with
respect of such REO Property to fail to qualify as Rents from Real Property
(provided that such income would otherwise so qualify).
"Individual Certificate": Any Certificate in definitive,
fully registered form without interest coupons.
"Institutional Accredited Investor": An entity meeting the
requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated
under the 1933 Act and which is not otherwise a Qualified Institutional Buyer.
"Insurance Proceeds": Proceeds of any fire and hazard
insurance policy, title policy or other insurance policy relating to a
Mortgage Loan and/or the Mortgaged Property securing any Mortgage Loan
(including any amounts paid by the Servicer or the Special Servicer pursuant
to Section 3.8), to the extent such proceeds are not to be applied to the
restoration of the related Mortgaged Property or released to the Borrower in
accordance with the express requirements of the related Mortgage or Note or
other documents including in the related Mortgage File or in accordance with
prudent and customary servicing practices.
"Interest Accrual Period": With respect to any Distribution
Date, the calendar month preceding the month in which such Distribution Date
occurs. Interest for each Interest Accrual Period shall be calculated based on
a ___-day year consisting of ______ __-day months.
"Interest Distribution Amount": With respect to any
Lower-Tier Regular Interest and any Distribution Date, interest for the
related Interest Accrual Period at the Lower-Tier
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Pass-Through Rate for such Interest Accrual Period on the Certificate Balance
of such Lower-Tier Regular Interest, provided that, for such purpose, any
distributions in reduction of the Certificate Balance and reductions of the
Certificate Balance as a result of allocations of Realized Losses on the
Distribution Date occurring in such Interest Accrual Period shall be deemed to
have been made as of the _____ day of such Interest Accrual Period.
"Interest Shortfall": With respect to any Distribution Date
for any Lower-Tier Regular Interest, the excess, if any, of the Interest
Distribution Amount of such Lower-Tier Regular Interest on such Distribution
Date over the amount actually distributed to such Lower-Tier Regular Interest
in respect of its Interest Distribution Amount on such Distribution Date.
"Interested Person": As of any date of determination, the
Depositor, the Servicer, the Special Servicer, the Trustee, any Borrower, any
Manager of a Mortgaged Property, any Independent Contractor engaged by the
Special Servicer pursuant to Section 3.17, or any Person known to a
Responsible Officer of the Trustee to be an Affiliate of any of them.
"Investment Account": As defined in Section 3.7(a).
"Investment Representation Letter": As defined in Section
5.2(c)(i).
"IRS": The Internal Revenue Service.
"Liquidation Expenses": Expenses incurred by the Special
Servicer and the Trustee in connection with the liquidation of any Specially
Serviced Mortgage Loan or property acquired in respect thereof (including,
without limitation, legal fees and expenses, committee or referee fees, and,
if applicable, brokerage commissions, and conveyance taxes) and any Property
Protection Expenses incurred with respect to such Specially Serviced Mortgage
Loan or such property not previously reimbursed from collections or other
proceeds therefrom.
"Liquidation Proceeds": The amount (other than Insurance
Proceeds) received in connection with (i) the taking of a Mortgaged Property
by exercise of the power of eminent domain or condemnation, (ii) the
liquidation of a Specially Serviced Mortgage Loan through a trustee's sale,
foreclosure sale or otherwise, (iii) the sale of a Specially Serviced Mortgage
Loan or an REO Property in accordance with Section 3.18 or (iv) the sale of
all of the Mortgage Loans in accordance with Section 9.1.
"Loan Agreement": With respect to any Mortgage Loan, the
loan agreement, if any, between the Originator and the Borrower, pursuant to
which such Mortgage Loan was made.
"Loan Number": With respect to any Mortgage Loan, the loan
number by which such Mortgage Loan was identified on the books and records of
the Servicer or any subservicer for the Servicer, as set forth in the Mortgage
Loan Schedule.
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"Loan-to-Value Ratio": With respect to any Mortgage Loan,
(a) the principal balance of such Mortgage Loan as of the Cut-off Date,
divided by (b) the Appraised Value of the related Mortgaged Property.
"Lower-Tier Pass-Through Rate": With respect to any
Distribution Date on or prior to the EC Maturity Date and any Class of
Lower-Tier Regular Interests other than the Class __________ Interests, a per
annum rate equal to the Weighted Average Net Mortgage Rate for the related
Interest Accrual Period, and with respect to the Class
________________________ ______________________ Interests, a per annum rate
equal to the higher of the Weighted Average Net Mortgage Rate for the related
Interest Accrual Period and __________ %. For each Distribution Date following
the EC Maturity Date and each of the Class _______________ and Interests, a
rate equal to the Pass-Through Rate of the Related Certificate. For each
Distribution Date following the EC Maturity Date and the Class ___________
Interests, a per annum rate equal to the higher of the Weighted Average Net
Mortgage Rate for the related Interest Accrual Period and for each
Distribution Date following the EC Maturity Date and the Class ____________
Interest, a per annum rate equal to the Weighted Average Net Mortgage Rate for
the related Interest Accrual Period.
"Lower-Tier Regular Interests": The Class __________
Interests.
"Lower-Tier REMIC": A segregated asset pool within the Trust
Fund consisting of the Mortgage Loans, collections thereon, any REO Property
acquired in respect thereof and amounts held from time to time in the
Collection Account.
"MAI": Member of the Appraisal Institute.
"Management Agreement": With respect to any Mortgage Loan,
the Management Agreement, if any, by and between the Manager and the related
Borrower, or any successor Management Agreement between such parties.
"Manager": With respect to any Mortgage Loan, any property
manager for the related Mortgaged Property.
"Maturity Date": With respect to each Mortgage Loan, the
maturity date as set forth in the Mortgage Loan Schedule.
" __________________ ": ________________ , together with its
successor and assigns.
"Monthly Payment": With respect to any Mortgage Loan (other
than any REO Mortgage Loan) and any Due Date, the scheduled monthly payment of
principal and interest, excluding any Balloon Payment, on such Mortgage Loan
which is payable by the related Borrower on such Due Date under the related
Note (after giving effect to any extension or modification permitted
hereunder). With respect to any REO Mortgage Loan, the monthly payment which
would otherwise have been payable on such Due Date had the related Note not
been discharged (after giving effect to any extension or other modification),
determined as set
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forth in the preceding sentence and on the assumption that all other amounts,
if any, due thereunder are paid when due.
"Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on or first priority ownership interest in a Mortgaged
Property securing the related Note.
"Mortgage File": With respect to any Mortgage Loan, the
mortgage documents required to be maintained in either the Trustee Mortgage
File or the Servicer Mortgage File.
"Mortgage Loan": Each of (i) the mortgage loans transferred
and assigned to the Trustee pursuant to Section 2.1 and from time to time held
in the Trust Fund, such mortgage loans originally so transferred, assigned and
held being identified on the Mortgage Loan Schedule as of the Cut-off Date and
(ii) the __________ Interest. Such term shall include any REO Mortgage Loan.
"Mortgage Loan Documents": Any and all documents contained
in the Trustee Mortgage File and the Servicer Mortgage File.
"Mortgage Loan Purchase and Sale Agreement": The Mortgage
Loan Purchase and Sale Agreement, dated as of the Cut-off Date, by and among
the Depositor, the Mortgage Loan Seller and ___________, substantially in the
form attached hereto as Exhibit G.
"Mortgage Loan Schedule": As of any date, the list of
Mortgage Loans included in the Trust Fund on such date, such list as of the
Closing Date being attached hereto as Exhibit B, which list shall set forth
the following information with respect to each Mortgage Loan:
(a) the Loan Number;
(b) the property name of the related Mortgaged Property
and the city and state where such Mortgaged
Property is located;
(c) the Monthly Payment in effect as of the Cut-off Date;
(d) the Mortgage Rate and the Default Rate;
(e) the Maturity Date;
(f) the period over which scheduled principal payments
on such Mortgage Loan would amortize the principal
balance thereof;
(g) the Debt Service Coverage Ratio and Loan to Value
Ratio.
(h) the Scheduled Principal Balance as of the Cut-off
Date and, as applicable, the allocation of such
balance to each related Mortgaged Property;
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(i) if applicable, the name of the Manager for the
related Mortgaged Property;
(j) whether such Mortgage Loan permits Non-Premium
Prepayments;
(k) a description of the Prepayment Premium payable
with respect to such Mortgage Loan;
(l) the Loan Number of any Mortgage Loan with which
such Mortgage Loan is cross-collateralized or
cross-defaulted;
(m) whether such Mortgage Loan is secured by a fee
simple interest or a leasehold interest in the
related Mortgaged Property or both;
(n) the property type of the Mortgaged Property
securing such Mortgage Loan; and
(o) the originator of such Mortgage Loan.
The Mortgage Loan Schedule shall also set forth the total of the amounts
described under clause (c) and (g) above for all of the Mortgage Loans. The
Mortgage Loan Schedule may be in the form of more than one list, collectively
setting forth all of the information required.
"Mortgage Loan Seller": ____________________ , a _________
corporation, and its successors in interest.
"Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan (in the absence of
a default), as set forth in the Mortgage Loan Schedule.
"Mortgaged Property": The underlying property securing a
Mortgage Loan (other than the _________ Interest), including any REO Property,
consisting of a fee simple or leasehold estate in a parcel of land improved by
a commercial property, together with any personal property, fixtures, leases
and other property or rights pertaining thereto.
"Net Liquidation Proceeds": The excess of Liquidation
Proceeds received with respect to any Mortgage Loan over the amount of
Liquidation Expenses incurred with respect thereto.
"Net Mortgage Rate": With respect to any Mortgage Loan, the
Mortgage Rate for such Mortgage Loan minus the Servicing Fee Rate.
"Net REO Proceeds": With respect to each REO Property, REO
Proceeds with respect to such REO Property net of any insurance premiums,
taxes, assessments and other costs and expenses permitted to be paid therefrom
pursuant to Section 3.17(b).
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"New Lease": Any lease of REO Property entered into on
behalf of the Trust Fund, including any lease renewed or extended on behalf of
the Trust Fund if the Trust Fund has the right to renegotiate the terms of
such lease.
"1933 Act ": The Securities Act of 1933, as it may be
amended from time to time.
"1934 Act": The Securities Exchange Act of 1934, as it may
be amended from time to time.
"Non-Premium Prepayment": Any Principal Prepayment received
that is not required to be accompanied by a Prepayment Premium.
"Nonrecoverable Advance ": Any portion of an Advance
proposed to be made or previously made which has not been previously
reimbursed to the Servicer, the Trustee or the Fiscal Agent, as applicable,
and which the Servicer, the Trustee or the Fiscal Agent has determined, based
on an internal or external appraisal conducted in accordance with MAI
standards and methodologies (which appraisal shall have been conducted within
the ___ months preceding any such determination) or, in the event that a Phase
I or Phase II environmental report has been conducted which leads the Servicer
to determine that foreclosing upon or otherwise obtaining title to the related
Mortgaged Property would be prohibited in accordance with the provisions of
Section 3.10(f), based on such environmental report, will not or, in the case
of a proposed Advance, would not, be ultimately recoverable by the Servicer,
the Trustee or the Fiscal Agent, as applicable, from late payments, Insurance
Proceeds, Condemnation Proceeds, Liquidation Proceeds and other collections on
or in respect of the related Mortgage Loan. To the extent that any Borrower is
not obligated under the related Mortgage Loan Documents to pay or reimburse
any portion of any Advances that are outstanding with respect to the related
Mortgage Loan as a result of a modification of such Mortgage Loan by the
Special Servicer which forgives unpaid Monthly Payments or other amounts which
the Servicer had previously advanced, and the Servicer determines that no
other source of payment or reimbursement for such advances is available to it,
such Advances shall be deemed to be nonrecoverable; provided, however, that in
connection with the foregoing the Servicer shall provide an Officer's
Certificate as described below. The determination by the Servicer, the Trustee
or the Fiscal Agent, as applicable, that it has made a Nonrecoverable Advance
or that any proposed Advance, if made, would constitute a Nonrecoverable
Advance shall be evidenced by a certificate of a Servicing Officer,
Responsible Officer or Vice President or equivalent or senior officer of the
Fiscal Agent, as appropriate, delivered to the Trustee, the Special Servicer
and the Depositor setting forth such determination and the procedures and
considerations of the Servicer, the Trustee or Fiscal Agent, as applicable,
forming the basis of such determination (including a copy of the appraisal or
environmental report which was the basis for such determination).
Notwithstanding the above, the Trustee and the Fiscal Agent shall be entitled
to rely upon any determination by the Servicer that any Advance previously
made is a Nonrecoverable Advance or that any proposed Advance, if made, would
constitute a Nonrecoverable Advance.
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"Non-U.S. Person": A person that is not a citizen or
resident of the United States; a corporation, partnership, or other entity
created or organized in or under the laws of the United States or any
political subdivision thereof; or an estate or trust whose income is subject
to United States federal income tax regardless of its source.
"Note": With respect to any Mortgage Loan (other than the
___________ Certificate) as of any date of determination, the note or other
evidence of indebtedness and/or agreements evidencing the indebtedness of the
related Borrower or obligor under such Mortgage Loan, and in the case of the
_______________ Interest, to the extent applicable, the ____________
Certificate, in each case, including any amendments or modifications, or any
renewal or substitution notes, as of such date.
"Notice of Termination": Any of (i) the notices given to the
Trustee by the Servicer or any Holder of a Class __ Certificate pursuant to
Section 9.1(c) and (ii) the notice given by the Trustee to each Holder
pursuant to Section 9.1(d)(iv).
"Officer's Certificate": A certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, a Vice
President (however denominated), the Treasurer, the Secretary, one of the
Assistant Treasurers or Assistant Secretaries or any other officer of the
general partner of the Servicer, Special Servicer or the Auction Agent
customarily performing functions similar to those performed by any of the
above designated officers and also with respect to a particular matter, any
other officer to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject, or an authorized
officer of the Depositor, and delivered to the Depositor, the Trustee, the
Special Servicer or the Servicer, as the case may be.
"Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be counsel for the Depositor, the Special Servicer or the
Servicer, as the case may be, acceptable to the Trustee, except that any
opinion of counsel relating to (a) qualification of the Upper-Tier REMIC or
Lower-Tier REMIC as a REMIC or the imposition of tax under the REMIC
Provisions on any income or property of either REMIC, (b) compliance with the
REMIC Provisions (including application of the definition of "Independent
Contractor") or (c) a resignation of the Servicer or the Special Servicer
pursuant to Section 6.4, must be an opinion of counsel who is Independent of
the Depositor, the Special Servicer and the Servicer.
"Originator": With respect to a Mortgage Loan, the
originator of such Mortgage Loan, as identified in the Mortgage Loan Schedule.
"Ownership Interest": As to any Certificate, any ownership
or security interest in such Certificate as the Holder thereof and any other
interest therein, whether direct or indirect, legal or beneficial, as owner or
as pledgee.
"P&I Advance": As to any Mortgage Loan, any advance made by
the Servicer, the Trustee, or the Fiscal Agent pursuant to Section
4.6(b)(iii).
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"P&I Certificates": The Class ___, Class ___, Class __,
Class ___, Class ___, Class ___, Class ___, Class ___ and Class ___
Certificates.
"Pass-Through Rate": Any one of the Class ___, Class ___,
Class ____, Class _, Class _, Class _, Class _, Class _, Class _, Class _ or
Class ___ Pass-Through Rates.
"Paying Agent": The paying agent appointed pursuant to
Section 5.5.
"Percentage Interest": As to any Certificate, the percentage
interest evidenced thereby in distributions required to be made with respect
to the related Class. With respect to any Certificate (except the Class __ and
Class ___ Certificates), the percentage interest is derived by dividing the
denomination of such Certificate by the initial Certificate Balance or
notional amount of such Class of Certificates. With respect to any Class ___
or Class ___ Certificate, the percentage interest is set forth on the face
thereof.
"Permitted Investments": Any one or more of the following
obligations or securities payable on demand or having a scheduled maturity on
or before the Business Day preceding the date on which such funds are required
to be drawn, regardless of whether issued by the Depositor, the Servicer, the
Special Servicer, the Trustee or any of their respective Affiliates, and
having at all times the required ratings, if any, provided for in this
definition (provided that no Permitted Investment, if downgraded, shall be
required to be sold at a loss), unless each Rating Agency shall have confirmed
in writing to the Servicer or the Special Servicer, as applicable, that a
lower rating will not result in the withdrawal, downgrading or qualification
of the ratings then assigned to the Certificates:
(i) direct obligations of, or obligations guaranteed as to full
and 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, including, without
limitation, U.S. Treasury Obligations, Farmers Home
Administration certificates of beneficial interest, General
Services Administration participation certificates and Small
Business Administration guaranteed participation
certificates or guaranteed pool certificates;
(ii) Federal Housing Administration debentures;
(iii) direct obligations of, or guaranteed as to timely payment of
principal and interest by, FHLMC (debt obligations only),
FNMA (debt obligations only), the Federal Farm Credit System
(consolidated systemwide bonds and notes only), the Federal
Home Loan Banks (consolidated debt obligations only), the
Student Loan Marketing Association, the Financing Corp.
(consolidated debt obligations only), and the Resolution
Funding Corp.;
(iv) Federal funds time deposits in, or uncertificated
certificates of deposit of, or bankers' acceptances, or
repurchase obligations, all having maturities of not more
than ___ days issued by, any bank or trust company, savings
and loan association or savings bank, depository institution
or trust company having a short term debt
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<PAGE>
obligation rating from S&P of "A-1+" and that is in the
highest short-term rating category of each Rating Agency
unless each of the Rating Agencies has confirmed in writing
that a lower rating shall not result, in and of itself, in a
downgrading, withdrawal or qualification of the rating then
assigned by such Rating Agency to any Class of the
Certificates;
(v) commercial paper having a maturity of ___ days or less
(including (A) 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 and (B) demand notes that
constitute vehicles for investment in commercial paper) that
is rated by each Rating Agency in its highest short-term
unsecured rating category;
(vi) units of taxable money market funds rated "AAAm" or "AAAg"
by S&P or mutual funds, which funds seek to maintain a
constant asset value and have been rated by each Rating
Agency in its highest rating category or which have been
designated in writing by each Rating Agency as Permitted
Investments with respect to this definition;
(vii) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment, as may be
acceptable to each Rating Agency as a permitted investment of funds
backing securities having ratings equivalent to its initial rating of
the Class ___, Class ___ and Class ___ Certificates if each of the
Rating Agencies has previously confirmed in writing that the holding
of such demand, money market or time deposit, demand obligation or
any other obligation, security or investment shall not result, in and
of itself, in a downgrading, withdrawal or qualification of the
rating then assigned by such Rating Agency to any Class of
Certificates; and
(viii) such other obligations confirmed in writing by each of the
Rating Agencies that such obligations are acceptable as Permitted
Investments and the holding of such obligations by the Servicer or
the Special Servicer, as applicable, shall not result, in and of
itself, in a downgrading, withdrawal or qualification of the rating
then assigned by such Rating Agency to any Class of Certificates;
provided, however, that (a) none of such obligations or
securities listed above shall have an "r" highlighter affixed to its rating if
rated by S&P; (b) each such obligation or security shall have a fixed dollar
amount of principal due at maturity which cannot vary or change; (c) if any
such obligation or security provides for a variable rate of interest, interest
shall be tied to a single interest rate index plus a single fixed spread (if
any) and move proportionately with that index; and (d) if any of the
obligations or securities listed in paragraphs (iii) - (ix) above are not
rated by _____________ , such investment shall be rated by ___________, as
appropriate, and if such obligations or securities are not rated by , such
investment shall be rated by S&P and one other nationally recognized
statistical rating organization; and provided, further, however, that such
instrument continues to qualify as a "cash flow investment" pursuant to Code
Section 860G(a)(6) earning a passive return in the nature of interest and that
no instrument
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<PAGE>
or security shall be a Permitted Investment if (i) such instrument or security
evidences a right to receive only interest payments or (ii) the right to
receive principal and interest payments derived from the underlying investment
provides a yield to maturity in excess of ___% of the yield to maturity at par
of such underlying investment.
"Permitted Transferee": With respect to a Class __ or Class
__ Certificate, any Person or agent thereof that is a Qualified Institutional
Buyer other than (a) a Disqualified Organization, (b) any other Person
designated by the Certificate Registrar based upon an Opinion of Counsel
(provided at the expense of such Person or the Person requesting the Transfer)
to the effect that the Transfer of an Ownership Interest in any Class __ or
Class __ Certificate to such Person may cause the Upper-Tier REMIC or Lower-
Tier REMIC to fail to qualify as a REMIC at any time that the Certificates are
outstanding, or (c) a Person that is a Disqualified Non-U.S. Person.
"Person": Any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
estate, unincorporated organization or government or any agency or political
subdivision thereof.
"Placement Agent": Prudential Securities Incorporated.
"Plan": As defined in Section 5.2(i).
"Pooled Available Funds": For each Distribution Date, the
sum of all previously undistributed Monthly Payments or other receipts on
account of principal and interest (including Unscheduled Payments and any Net
REO Proceeds transferred from an REO Account to the Collection Account
pursuant to Section 3.17(b)) on or in respect of the Mortgage Loans received
by the Servicer in the Collection Period relating to such Distribution Date,
plus all other amounts received by the Servicer during such Collection Period
and required to be placed in the Collection Account by the Servicer pursuant
to Section 3.5(a) allocable to such Mortgage Loans, and including all P&I
Advances made by the Servicer, the Trustee or the Fiscal Agent in respect of
such Distribution Date and deposits made by the Servicer pursuant to Section
3.25 with respect to such Distribution Date, but excluding the following:
(a) amounts permitted to be used to reimburse the
Servicer, the Trustee or the Fiscal Agent for
previously unreimbursed Advances and interest
thereon as described in Section 3.6(ii) and (iii);
(b) those portions of each payment of interest which
represent the applicable Servicing Compensation;
(c) all amounts in the nature of late fees, late
charges and similar fees, loan modification fees,
extension fees, loan service transaction fees,
demand fees, beneficiary statement charges,
Assumption Fees and similar fees;
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<PAGE>
(d) all amounts representing scheduled Monthly Payments
due after the Due Date in the related Collection
Period (such amounts to be treated as received on
the Due Date when due);
(e) that portion of Liquidation Proceeds, Condemnation
Proceeds or Insurance Proceeds with respect to a
Mortgage Loan which represents any unpaid Servicing
Compensation to which the Servicer is entitled;
(f) all amounts representing certain expenses
reimbursable to the Servicer, the Special Servicer,
the Trustee or the Fiscal Agent and other amounts
permitted to be retained by the Servicer or the
Special Servicer or withdrawn by the Servicer from
the Collection Account (including, without
limitation, as provided in Section 3.6) pursuant to
the terms hereof;
(g) with respect to Distribution Dates after the EC
Maturity Date, Prepayment Premiums received in the
related Collection Period;
(h) any interest or investment income on funds on
deposit in the Collection Account or in Permitted
Investments in which such fund may be invested.
"Pooled Principal Distribution Amount": For any Distribution
Date, an amount equal to the sum of:
(i) the principal component of all scheduled Monthly
Payments (other than Balloon Payments) which become
due (regardless of whether received) on the
Mortgage Loans during the related Collection
Period;
(ii) to the extent not included elsewhere in this
definition, the principal component of all Assumed
Scheduled Payments, as applicable, deemed to become
due (regardless of whether received) during the
related Collection Period with respect to any
Mortgage Loan that is delinquent in respect of its
Balloon Payment;
(iii) to the extent not included elsewhere in this
definition, the Scheduled Principal Balance of each
Mortgage Loan that was repurchased from the Trust
Fund in connection with the breach of a
representation or warranty or purchased from the
Trust Fund pursuant to Section 9.1, in either case,
during the related Collection Period;
(iv) to the extent not included elsewhere in this
definition, the portion of Unscheduled Payments
allocable to principal of any Mortgage Loan that
was liquidated during the related Collection
Period;
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<PAGE>
(v) to the extent not included elsewhere in this
definition, the principal component of all Balloon
Payments received during the related Collection
Period;
(vi) to the extent not included elsewhere in this
definition, all other Principal Prepayments
received in the related Collection Period; and
(vii) to the extent not included elsewhere in this
definition, any other full or partial recoveries in
respect of principal, including Insurance Proceeds,
Condemnation Proceeds, Liquidation Proceeds and Net
REO Proceeds.
"Prepayment Assumption": The assumption identified as
"Scenario 3" in Exhibit A to the Private Placement Memorandum dated _________
,relating to the Privately Placed Certificates and identified as "Scenario 3"
in the Prospectus Supplement, dated _________ , relating to the Publicly
Offered Certificates.
"Prepayment Interest Shortfall": With respect to any
Distribution Date and any Mortgage Loan as to which a Principal Prepayment was
made by the related Borrower during the related Collection Period, the amount
by which (i) __ full days of interest at the related Net Mortgage Rate on the
Scheduled Principal Balance of such Mortgage Loan in respect of which interest
would have been due in the absence of such Principal Prepayment on the Due
Date next succeeding the date of such Principal Prepayment exceeds (ii) the
amount of interest received from the related Borrower in respect of such
Principal Prepayment.
"Prepayment Interest Surplus": With respect to any
Distribution Date and any Mortgage Loan as to which a Principal Prepayment was
made by the related Borrower during the related Collection Period, the amount
by which (i) the amount of interest received from the related Borrower in
respect of such Principal Prepayment exceeds (ii) __ full days of interest at
the related Net Mortgage Rate on the Scheduled Principal Balance of such
Mortgage Loan in respect of which interest would have been due in the absence
of such Principal Prepayment on the Due Date next succeeding the date of such
Principal Prepayment.
"Prepayment Premium": Payments received on a Mortgage Loan
as the result of a Principal Prepayment thereon, not otherwise due thereon in
respect of principal or interest, which are intended to be a disincentive to
prepayment.
"Principal Prepayment": With respect to any Mortgage Loan,
any payment of principal made by the related Borrower which is received in
advance of its scheduled Due Date and which is not accompanied by an amount of
interest representing the full amount of scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment.
"Prior Pooling and Servicing Agreement": The Amended and
Restated Pooling and Servicing Agreement, dated as of _____________________ ,
by and among Prudential Securities Secured Financing Corporation, as
depositor, _________________ as servicer, ___ as special servicer, ________ ,
as trustee and _______, as fiscal agent, with respect to the
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<PAGE>
Prudential Securities Secured Financing Corporation, Commercial Mortgage
Pass-Through Certificates, Series _____________.
"Privately Placed Certificates": The Class ___ Certificates,
the Class ____ Certificates, the Class __ Certificates, the Class __
Certificates, the Class __ Certificates, the Class __ Certificates, the Class
___ Certificates, the Class ___ Certificates, the Class __ Certificates and
the Class ___ Certificates.
"Property Advance": As to any Mortgage Loan, any advance
made by the Servicer, the Trustee or the Fiscal Agent in respect of Property
Protection Expenses or any expenses incurred to protect and preserve the
security for such Mortgage Loan or taxes and assessments or insurance
premiums, pursuant to Section 3.4, 3.8 or Section 3.22, as applicable.
"Property Protection Expenses": Any costs and expenses
incurred pursuant to Sections 3.10(c), 3.10(g), 3.10(j), 3.17(b), 3.17(c),
3.18(a) and 3.18(b).
"Publicly Offered Certificates": The Class ___ Certificates,
the Class __ Certificates, the Class __ Certificates and the Class __
Certificates.
"Qualified Institutional Buyer": A qualified institutional
buyer within the meaning of Rule 144A.
"Qualified Insurer": An insurance company or security or
bonding company qualified to write the related insurance policy in the
relevant jurisdiction, which (i) except as provided in clauses (ii) or (iii)
below, shall have a claims paying ability of "AA" or better by each Rating
Agency (or, if such company is not rated by ___________ , and if such company
is not rated by either __________ , by _______ and one other nationally
recognized statistical rating organization), (ii) in the case of public
liability insurance policies required to be maintained with respect to REO
Properties in accordance with Section 3.8(a), shall have a claims paying
ability of "A" or better by each Rating Agency (or, if such company is not
rated by _____________ , by S&P and one other nationally recognized
statistical rating organization) or (iii) in the case of the fidelity bond and
errors and omissions insurance required to be maintained pursuant to Section
3.8(c), shall have a claims paying ability rated by each Rating Agency (or if
such company is not rated by , and if such company is not rated by either
____________, by S&P and one other nationally recognized statistical rating
organization) no lower than two ratings categories lower than the highest
rating of any outstanding Class of Certificates from time to time, but in no
event lower than "BBB", unless in any such case each of the Rating Agencies
has confirmed in writing that an insurance company with a lower claims paying
ability shall not result, in and of itself, in a downgrading, withdrawal or
qualification of the rating then assigned by such Rating Agency to any Class
of Certificates.
"Qualified Mortgage": A Mortgage Loan that is a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code (but without
regard to the rule in Treasury Regulations 1.860G-2(f)(2) that treats a
defective obligation as a qualified mortgage), or any substantially similar
successor provision.
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<PAGE>
"Qualified Offeror": A prospective purchaser of the Mortgage
Loans in an auction pursuant to Section 9.1(d) whom the Auction Agent has
reasonably determined possesses the financial ability and is otherwise
qualified to purchase all of the Mortgage Loans.
"Rating Agency": Each of . References
herein to the highest long-term unsecured debt rating category of each Rating
Agency shall mean "AAA."
"Real Property": Land or improvements thereon such as
buildings or other inherently permanent structures (including items that are
structural components of such buildings or structures), in each such case as
such terms are used in the REMIC Provisions.
"Realized Loss": With respect to any Distribution Date, the
amount, if any, by which the aggregate of the Certificate Balances of the
Lower-Tier Regular Interests, after giving effect to distributions made on
such Distribution Date, exceeds the aggregate of the
Scheduled Principal Balances of the Mortgage Loans as of the Due Date in the
month in which such Distribution Date occurs.
"Record Date": With respect to each Distribution Date, the
_____ business day of the month preceding the month in which such Distribution
Date occurs.
"Regular Certificates": The Class ___, Class ___, Class
____, Class __, Class __, Class __, Class __, Class __, Class __, Class __,
Class ___ and Class ___ Certificates.
"Regular Servicing Period": Any Interest Accrual Period
other than a Special Servicing Period.
"Regulation D": Regulation D under the Act.
"Related Certificates" and "Related Lower-Tier Regular
Interest": For any Lower-Tier Regular Interest, the related Certificates set
forth below and for any Certificates, the related Lower-Tier Regular Interest
set forth below:
Related Lower-Tier
Related Certificates Regular Interest
- -------------------- ----------------
Class Class
Class Class
Class N/A
Class Class
Class Class
Class Class
Class Class
Class Class
Class Class
Class Class
Class Class
Class N/A
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<PAGE>
"REMIC": A "real estate mortgage investment conduit" within
the meaning of Section 860D of the Code.
"REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and regulations (including any applicable proposed regulations)
and rulings promulgated thereunder, as the foregoing may be in effect from
time to time.
"Remittance Date": The Business Day preceding each
Distribution Date.
"Rents from Real Property": With respect to any REO
Property, gross income of the character described in Section 856(d) of the
Code, which income, subject to the terms and conditions of that Section of the
Code in its present form, does not include:
(i) except as provided in Section 856(d)(4) or (6) of
the Code, any amount received or accrued, directly
or indirectly, with respect to such REO Property,
if the determination of such amount depends in
whole or in part on the income of profits derived
by any Person from such property (unless such
amount is a fixed percentage or percentages of
receipts or sales and otherwise constitutes Rents
from Real Property);
(ii) any amount received or accrued, directly or
indirectly, from any Person if the Trust Fund owns
directly or indirectly (including by attribution) a
ten percent or greater interest in such Person
determined in accordance with Sections 856(d)(2)(B)
and (d)(5) of the Code;
(iii) any amount received or accrued, directly or
indirectly, with respect to such REO Property if
any Person Directly Operates such REO Property;
(iv) any amount charged for services that are not
customarily furnished in connection with the rental
of property to tenants in buildings of a similar
class in the same geographic market as such REO
Property within the meaning of Treasury Regulations
Section 1.856-4(b)(1) (whether or not such charges
are separately stated); and
(v) rent attributable to personal property unless such
personal property is leased under, or in connection
with, the lease of such REO Property and, for any
taxable year of the Trust Fund, such rent is no
greater than 15 percent of the total rent received
or accrued under, or in connection with, the lease.
"REO Account": As defined in Section 3.17(b).
"REO Mortgage Loan": Any Mortgage Loan (other than the
_____________ Interest) as to which the related Mortgaged Property has become
an REO Property.
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<PAGE>
"REO Proceeds": With respect to any REO Property and the
related REO Mortgage Loan, all revenues received by the Servicer with respect
to such REO Property or REO Mortgage Loan that do not constitute Liquidation
Proceeds.
"REO Property": A Mortgaged Property title to which has been
acquired by the Servicer on behalf of the Trust Fund through foreclosure, deed
in lieu of foreclosure or otherwise.
"Repurchase Price": With respect to any Mortgage Loan to be
repurchased pursuant to Section 2.3(d) or 2.3(e) or any Specially Serviced
Mortgage Loan or any REO Property to be sold or repurchased pursuant to
Section 3.18, an amount, calculated by the Servicer, equal to:
(i) the unpaid principal balance of such Mortgage Loan,
Specially Serviced Mortgage Loan or REO Mortgage
Loan related to any REO Property as of the Due Date
as to which a payment was last made by the related
Borrower or was advanced by the Servicer; plus
(ii) unpaid accrued interest from the Due Date as to
which interest was last paid by such Borrower or
was advanced by the Servicer up to the Due Date in
the month following the month in which the purchase
or repurchase occurred at a rate equal to the
related Mortgage Rate on the unpaid principal
balance of such Mortgage Loan, Specially Serviced
Mortgage Loan or REO Mortgage Loan related to any
REO Property; plus
(iii) any unreimbursed Advances, together with
interest thereon at the Advance Rate, and
unpaid Servicing Compensation allocable to
such Mortgage Loan; and plus
(iv) in the event that such Mortgage Loan is required to
be repurchased pursuant to Section 2.3(d) or
2.3(e), expenses reasonably incurred or to be
incurred by the Servicer or the Trustee in respect
of the breach or defect giving rise to the
repurchase obligation, including any expenses
arising out of the enforcement of the repurchase
obligation.
"Request for Release": A request for release signed by a
Servicing Officer, substantially in the form of Exhibit __ hereto.
"Reserve Accounts": With respect to any Mortgage Loan,
reserve or escrow accounts, if any, established pursuant to the related
Mortgage Loan Documents and any Escrow Account. Each Reserve Account shall be
an Eligible Account, except with respect to Mortgage Loans No. 95-0903263 and
95-0903264. Any Reserve Account shall be beneficially owned for federal income
tax purposes by the Person who is entitled to receive the reinvestment income
or gain thereon in accordance with the related Mortgage Loan Documents and
Section 3.7.
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<PAGE>
"Responsible Officer": Any officer or any employee with
responsibilities similar to those of an officer of the Asset-Backed Trust
Services Department of the Trustee (and, in the event that the Trustee is the
Certificate Registrar or the Paying Agent, of the Certificate Registrar or the
Paying Agent, as applicable) assigned to the Corporate Trust Office with
direct responsibility for the administration of this Agreement and also, with
respect to a particular matter, any other officer or any employee with
responsibilities similar to those of an officer of the Asset-Backed Trust
Services Department of the Trustee to whom such matter is referred because of
such officer's or employee's knowledge of and familiarity with the particular
subject, and, in the case of any certification required to be signed by a
Responsible Officer, such an officer or employee whose name and specimen
signature appears on a list of corporate trust officers and employees
furnished to the Servicer by the Trustee, as such list may from time to time
be amended.
"Rule 144A": Rule 144A, under the 1933 Act.
" ": __________________ Rating Services, or its successor in
interest.
"Scheduled Final Distribution Date": ____________________
"Scheduled Principal Balance": With respect to any Mortgage
Loan, as of any Due Date, the principal balance of such Mortgage Loan as of
such Due Date, after giving effect to (a) any Principal Prepayments,
Non-Premium Prepayments or other unscheduled recoveries of principal and any
Balloon Payments received during the related Collection Period, and (b) any
payment in respect of principal, if any, due on or before such Due Date (other
than a Balloon Payment, but including the principal portion of any Assumed
Scheduled Payment, if applicable), irrespective of any delinquency in payment
by the Borrower. The Scheduled Principal Balance of any REO Mortgage Loan as
of any Due Date is equal to the principal balance thereof outstanding on the
date that the related Mortgaged Property became an REO Property minus any Net
REO Proceeds allocated to principal on such REO Mortgage Loan and reduced by
Monthly Payments due thereon on or before such Due Date. With respect to any
Mortgage Loan, from and after the date on which the Servicer makes a Final
Recovery Determination, the Scheduled Principal Balance thereof shall be zero.
" ________________ ": A mortgage loan originated by
___________________ and identified in the ___________________ Agreement.
" __________________ Agreement": The Participation Agreement,
dated as of ___________________ , by and between ____________________ (in its
capacity as trustee under the Prior Pooling and Servicing Agreement), as seller,
and the Mortgage Loan Seller, as participant, substantially in the form
attached hereto as Exhibit I.
" __________________ Certificate": The certificate issued by
the trustee under the Prior Pooling and Servicing Agreement in the name of the
Trustee, evidencing the _________ Interest.
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<PAGE>
" ___________________ Interest ": The ___% participation
interest in the __________ Loan evidenced by the ___________________
Certificate.
"Securities Depository": The Depository Trust Company, or
any successor Securities Depository hereafter named. The nominee of the
initial Securities Depository, for purposes of registering those Certificates
that are to be Book-Entry Certificates, is Cede & Co. The Securities
Depository shall at all times be a "clearing corporation" as defined in
Section 8-102(3) of the Uniform Commercial Code of the State of New York and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended.
"Securities Depository Participant": A broker, dealer, bank
or other financial institution or other Person for whom from time to time the
Securities Depository effects book-entry transfers and pledges of securities
deposited with the Securities Depository.
"Securities Legend": With respect to each Residual
Certificate and any Individual Certificate (other than a Residual Certificate)
that is a Privately Placed Certificate the legend set forth in, and
substantially in the form of, Exhibit __ hereto.
"Senior Principal Distribution Cross-Over Date": The first
Distribution Date as of which the aggregate Certificate Balance of the Class
___ Certificates and of the Class ___ Certificates outstanding immediately
prior thereto exceeds the sum of (a) the aggregate Scheduled Principal Balance
of the Mortgage Loans that will be outstanding immediately following such
Distribution Date and (b) the portion of the Available Distribution Amount for
such Distribution Date that will remain after the distribution of interest has
been made on the Class ___ and Class ___ Certificates on such Distribution
Date.
"Seriously Delinquent Loan": With respect to any Remittance
Date, any Mortgage Loan that (i) is __ days or more delinquent (without regard
to any grace period) or (ii) was __ days or more delinquent (without regard to
any grace period) and as to which the related Borrower has not made, since the
most recent date on which such Mortgage Loan was so delinquent, __ consecutive
Monthly Payments.
"Servicer ": ________________, a _______________, or its
successor in interest, or any successor Servicer appointed as herein provided.
"Servicer Mortgage File": With respect to any Mortgage Loan,
all Mortgage Loan Documents related to such Mortgage Loan that are not
required to be delivered to the Custodian pursuant to Section 2.1 or to be
maintained as part of the Trustee Mortgage File, including without limitation:
(i) a copy of the Management Agreement, if any, for the
related Mortgaged Property;
(ii) a copy of the related ground lease, as amended, if
any, for such Mortgaged Property;
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<PAGE>
(iii) any and all amendments, modifications and
supplements to, and waivers related to, any of the
foregoing;
(iv) copies of the related appraisals, surveys,
environmental reports and other similar documents;
and
(v) any other written agreements related to such
Mortgage Loan.
"Servicer Remittance Report": A report prepared by the
Servicer in such media as may be agreed upon by the Servicer and the Trustee
containing such information regarding the Mortgage Loans as will permit the
Trustee to calculate the amounts to be distributed pursuant to Section 4.1 and
to furnish statements to Certificateholders pursuant to Section 4.2 and
containing such additional information as the Servicer and the Trustee may
from time to time agree.
"Servicing Compensation": With respect to each Mortgage
Loan, the Servicing Fee and the Special Servicing Fee which shall be due to
the Servicer and the Special Servicer, as applicable, and such other
compensation of the Servicer and Special Servicer specified in Section 3.12,
as adjusted pursuant to Section 3.25.
"Servicing Fee": With respect to each Mortgage Loan and for
any Distribution Date, an amount per calendar month equal to the product of
(i) one-twelfth of the related Servicing Fee Rate and (ii) the Scheduled
Principal Balance of such Mortgage Loan as of the Due Date in the month
preceding the month in which such Distribution Date occurs.
"Servicing Fee Rate": With respect to Mortgage Loan No.
______ , a rate equal to __________ % per annum. With respect to Mortgage
Loans No. ____________ , ______ , ____________ , ____________ , ____________ ,
_____________ and _________________ , a rate equal to ____% per annum. With
respect to each other Mortgage Loan, a rate equal to _________ %
per annum.
"Servicing Officer": Any officer or employee of the Servicer
or the Special Servicer involved in, or responsible for, the administration
and servicing of the Mortgage Loans or this Agreement and also, with respect
to a particular matter, any other officer or employee to whom such matter is
referred because of such officer's or employee's knowledge of and familiarity
with the particular subject, and, in the case of any certification required to
be signed by a Servicing Officer, such an officer or employee whose name and
specimen signature appears on a list of servicing officers furnished to the
Trustee by the Servicer or the Special Servicer, as applicable, as such list
may from time to time be amended, together with, in the case of a certificate
or other writing executed by an employee who constitutes a Servicing Officer
because of such employee's knowledge and familiarity with a particular
subject, a countersignature of an officer of the general partner of the
Servicer or of an officer of the Special Servicer, as appropriate.
"Servicing Standard": The standards for the conduct of the
Servicer and the Special Servicer in the performance of their obligations
under this Agreement set forth in Section 3.1(a).
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"Similar Law": As defined in Section 5.2(i).
"Special Servicer": _________ a ____________ _______, or its
successor in interest, or any successor Special Servicer appointed as herein
provided.
"Special Servicing Fee": With respect to any Specially
Serviced Mortgage Loan or REO Mortgage Loan and for any Distribution Date, an
amount per calendar month equal to the product of (i) one-twelfth of the
Special Servicing Fee Rate and (ii) the Scheduled Principal Balance of such
Specially Serviced Mortgage Loan or REO Mortgage Loan, as applicable, as of
the Due Date in the month preceding the month in which such Distribution Date
occurs.
"Special Servicing Fee Rate": A rate equal to % per
annum.
"Special Servicing Period": Any Interest Accrual Period
during which a Mortgage Loan is at any time a Specially Serviced Mortgage Loan.
"Specially Serviced Mortgage Loan": Subject to Section 3.24,
any Mortgage Loan (other than the Interest) with respect to
which:
(i) the related Borrower is __ or more days delinquent
(without giving effect to any grace period
permitted by the related Note) in the payment of a
Monthly Payment (regardless of whether, in respect
thereof, P&I Advances have been reimbursed);
(ii) such Borrower has expressed to the Servicer an
inability to pay or a hardship in paying such
Mortgage Loan in accordance with its terms;
(iii) the Servicer has received notice that such Borrower
has become the subject of any bankruptcy,
insolvency or similar proceeding, admitted in
writing the inability to pay its debts as they come
due or made an assignment for the benefit of
creditors;
(iv) the Servicer has received notice of a foreclosure
or threatened foreclosure of any lien on the
related Mortgaged Property;
(v) a default of which the Servicer has notice (other
than a failure by such Borrower to pay principal or
interest) and which materially and adversely
affects the interests of the Certificateholders has
occurred and remained unremedied for the applicable
grace period specified in such Mortgage Loan (or,
if no grace period is specified, __ days);
provided, however, that a default requiring a
Property Advance shall be deemed to materially and
adversely affect the interests of the
Certificateholders;
(vi) such Borrower has failed to make a Balloon Payment
as and when due; or
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(vii) the Servicer proposes to commence foreclosure or
other workout arrangements;
provided, however, that a Mortgage Loan will cease
to be a Specially Serviced Mortgage Loan:
(a) with respect to the circumstances
described in clause (i) and (vi) above,
when the related Borrower has brought such
Mortgage Loan current (with respect to the
circumstances described in clause (vi),
pursuant to any workout implemented by the
Special Servicer) and thereafter made
three consecutive full and timely Monthly
Payments;
(b) with respect to the circumstances
described in clauses (ii) and (iv) above,
when such circumstances cease to exist in
the good faith judgment of the Special
Servicer and with respect to the
circumstances described in clauses (iii)
and (vii), when such circumstances cease
to exist; or
(c) with respect to the circumstances
described in clause (v) above, when such
default is cured;
provided, however, that at the time no circumstance identified in clauses (i)
through (vii) above exists that would cause the Mortgage Loan to continue to
be characterized as a Specially Serviced Mortgage Loan.
"Startup Day": The day designated as such pursuant to
Section 2.6(a) hereof.
"Subordinate Certificates": Any one or more of the Class
___________ Certificates.
"Tax Returns": The federal income tax return on IRS Form
1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return,
including Schedule Q thereto, Quarterly Notice to Residual Interest Holders of
REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be
filed on behalf of each of the Upper-Tier REMIC and Lower-Tier REMIC under the
REMIC Provisions, together with any and all other information, reports or
returns that may be required to be furnished to the Certificateholders or
filed with the IRS or any other governmental taxing authority under any
applicable provisions of federal, state or local tax laws.
"Termination Date": The Distribution Date on which the Trust
Fund is terminated pursuant to Section 9.1.
"Transfer": Any direct or indirect transfer or other form of
assignment of any Ownership Interest in a Class __ or Class __ Certificate.
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"Transferee Affidavit": As defined in Section 5.2(j).
"Transferor Letter": As defined in Section 5.2(j).
"Trust Fund": The corpus of the trust created hereby and to
be _________ administered hereunder, consisting of: (i) such Mortgage Loans
(other than the Interest) as from time to time are subject to this Agreement,
together with the Mortgage Files relating thereto; (ii) the ________ Interest,
(iii) all payments on or collections in respect of such Mortgage Loans due
after the Cut-off Date; (iv) any REO Property; (v) all revenues received in
respect of REO Property; (vi) the Servicer's, the Special Servicer's and the
Trustee's rights under the insurance policies with respect to such Mortgage
Loans required to be maintained pursuant to this Agreement and any proceeds
thereof; (vii) any Assignments of Leases, Rents and Profits and any security
agreements; (viii) any indemnities or guaranties given as additional security
for such Mortgage Loans; (ix) the Trustee's right, title and interest in and
to the Reserve Accounts; (x) the Collection Account; (xi) the Distribution
Account and the REO Account, including reinvestment income, if any, thereon;
(xii) any environmental indemnity agreements relating to such Mortgaged
Properties; (xiii) the rights and remedies under the Mortgage Loan Purchase
and Sale Agreement; and (xiv) the proceeds of any of the foregoing (other than
any interest earned on deposits in any Reserve Account, to the extent such
interest belongs to the related Borrower).
"Trust REMICs": The Lower-Tier REMIC and the Upper-Tier
REMIC.
"Trustee": ____________________ , in its capacity as trustee,
or its successor in interest, or any successor trustee appointed as herein
provided.
"Trustee Fee": With respect to each Mortgage Loan and for
any Distribution Date, an amount per calendar month equal to the product of
(i) one-twelfth of the Trustee Fee Rate and (ii) the Scheduled Principal
Balance of such Mortgage Loan as of the Due Date in the month preceding the
month in which such Distribution Date occurs. The Trustee Fee shall be paid by
the Servicer on each Distribution Date.
"Trustee Fee Rate": A rate equal to ___________ % per annum.
"Trustee Mortgage File": With respect to any Mortgage Loan,
the mortgage documents listed in Section 2.1(i) through (xii) pertaining to
such Mortgage Loan, the documents listed in the third paragraph of Section 2.1
and any additional documents required to be deposited with the Trustee
pursuant to the express provisions of this Agreement.
"ULLICO": The Union Labor Life Insurance Company, a Maryland
corporation, as the Originator of seven of the Mortgage Loans.
"Uncovered Prepayment Interest Shortfall": For any
Distribution Date, any Prepayment Interest Shortfall not covered by the
Servicing Fee or the Special Servicing Fee pursuant to Section 3.25.
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"Underwritten Cash Flow": With respect to any Mortgage Loan,
the cash flow available for debt service on the related Mortgage Loan for a
__-month period, as determined by _________ in accordance with the standards of
a prudent commercial mortgage lender based upon recent information supplied by
the related Borrower prior to the origination of such Mortgage Loan, and
adjusted, if determined appropriate by
, to: (a) deduct any non-cash items such as depreciation or
amortization; (b) deduct capital expenditures; (c) reflect a more appropriate
occupancy rate; (d) reflect replacement, capital expenditure and other
reserves required by the related Mortgage Loan Documents; (e) reflect a market
rate management fee; (f) exclude certain percentage rent, delinquent rents and
non-recurring income; (g) reflect an allowance for tenant improvements and
leasing commissions; and (h) reflect such other adjustments determined
appropriate by
"Unscheduled Payments": With respect to a Mortgage Loan and
a Collection Period, all Liquidation Proceeds, Condemnation Proceeds and
Insurance Proceeds payable under such Mortgage Loan, the Repurchase Price of
such Mortgage Loan if it is repurchased or purchased pursuant to Sections
2.3(d) or 2.3(e) and the price specified in Section 9.1 if such Mortgage Loan
is purchased or repurchased pursuant thereto, draws on any letters of credit
issued with respect to such Mortgage Loan and any other payments under or with
respect to such Mortgage Loan not scheduled to be made, including Principal
Prepayments (but excluding Prepayment Premiums) received during such
Collection Period.
"Updated Appraisal": As defined in Section 3.10(a).
"Upper-Tier REMIC": A segregated asset pool within the Trust
Fund consisting of the Lower-Tier Regular Interests and amounts held from time
to time in the Distribution Account.
"Voting Right": The portion of the voting rights of all of
the Certificates that is allocated to any Certificate or Class of
Certificates. At all times during the term of this Agreement, the percentage
of the Voting Rights assigned to each Class shall be (a) __%, in the case of
the _____ and _____ Certificates, (b) in the case of any of the Class ___,
Class ___, Class __, Class __, Class __, Class __, Class __, Class __ and
Class __ Certificates, a percentage equal to the product of (x) __% on and
prior to the EC Maturity Date and __% thereafter and (y) a fraction, the
numerator of which is equal to the aggregate outstanding Certificate Balance
of such Class of Certificates and the denominator of which is equal to the
aggregate outstanding Certificate Balances of all Classes of Certificates, (c)
in the case of the Class ___ Certificates, a percentage equal to __% on and
prior to the EC Maturity Date and __% thereafter, (d) in the case of the Class
___ Certificates, a percentage equal to __% and (e) in the case of the Class
___ Certificates, a percentage equal to __%. The Voting Rights of any Class of
Certificates shall be allocated among Holders of Certificates of such Class in
proportion to their respective Percentage Interests, except that any
Certificate registered in the name of the Depositor, the Servicer, any
Borrower, the Trustee, a Manager or any of their respective Affiliates shall
be deemed not to be outstanding for purposes of giving any consent (unless
such consent is to an action which would materially adversely affect in any
material respect the interests of the Certificateholders of any Class, while
the Servicer or any Affiliate thereof is the holder of Certificates
aggregating not less than _____% of the Percentage Interest of any such
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Class). The aggregate Voting Rights of Holders of more than one Class of
Certificates shall be equal to the sum of the products of each such Holder's
Voting Rights and the percentage of Voting Rights allocated to the related
Class of Certificates.
"Weighted Average Net Mortgage Rate": With respect to any
Interest Accrual Period, a per annum rate equal to the weighted average of the
Net Mortgage Rates, as of the related Due Date (weighted on the basis of the
Scheduled Principal Balance of each Mortgage Loan).
"Yield Maintenance Loan": Any Mortgage Loan as to which the
related Note requires the payment of Prepayment Premiums calculated with
reference to a yield maintenance formula.
"Yield Maintenance Period": With respect to each Yield
Maintenance Loan, the period following the origination thereof during which
the related Note requires the payment of Prepayment Premiums calculated with
reference to a yield maintenance formula.
SECTION 1.2. Certain Calculations.
Unless otherwise specified herein, the following provisions
shall apply:
(a) All calculations of interest (including interest on the
Mortgage Loans) provided for herein shall be made on the basis of a ___-day
year consisting of _____ __-day months.
(b) The portion of any Insurance Proceeds, Condemnation
Proceeds, Liquidation Proceeds or Net REO Proceeds in respect of a Mortgage
Loan allocable to principal and Prepayment Premiums shall equal the total
amount of such proceeds minus (a) first any portion thereof payable to the
Servicer, the Special Servicer, the Trustee or the Fiscal Agent pursuant to
the provisions of this Agreement and (b) second any portion thereof equal to
interest on the unpaid principal balance of such Mortgage Loan at the related
Mortgage Rate less the related Servicing Fee from the Due Date as to which
interest was last paid by the related Borrower up to but not including the Due
Date in the Collection Period in which such proceeds are received. Allocation
of such amount between principal and Prepayment Premium shall be made first to
principal and second to Prepayment Premium.
(c) Any Mortgage Loan payment is deemed to be received on
the date such payment is actually received by the Servicer, the Special
Servicer or the Trustee; provided, however, that for purposes of calculating
distributions on the Certificates, Principal Prepayments with respect to any
Mortgage Loan are deemed to be received on the date they are applied in
accordance with Section 3.1(b) to reduce the outstanding principal balance of
such Mortgage Loan on which interest accrues.
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SECTION 1.3. Certain Constructions.
For purposes of Section 3.10, Section 3.23 and Section
4.6(c), references to the most or next most subordinate Class of Certificates
outstanding at any time shall mean the most or next most subordinate Class of
Certificates then outstanding as among the Class
Certificates shall be considered to be one Class), and
references to the next most subordinate Class of Lower-Tier Regular Interests
outstanding at any time shall mean the most or next most subordinate Class of
Lower-Tier Regular Interests then outstanding as among the Class interests,
subject in each case to the rules of construction set forth in the following
sentences of this Section 1.3. Each Class of Certificates, shall be deemed to
be outstanding only to the extent its respective Certificate Balance has not
been reduced to zero or, with respect to the Class ___ Certificates, to the
extent that the EC Maturity Date has not occurred or with respect to the Class
___ Certificates, to the extent the Class ___ Notional Balance has not been
reduced to zero.
Unless the context clearly indicates otherwise, references
to section numbers are to sections of this Agreement.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.1. Conveyance and Assignment of Mortgage Loans;.
The Depositor, concurrently with the execution and delivery
hereof, does hereby sell, transfer, assign, set over and otherwise convey to
the Trustee without recourse (except to the extent herein provided) all the
right, title and interest of the Depositor in and to the Mortgage Loans,
including all rights to payment in respect thereof, except as set forth below,
and any security interest thereunder (whether in real or personal property and
whether tangible or intangible) in favor of the Depositor, and all Reserve
Accounts and all other assets included or to be included in the Trust Fund for
the benefit of the Certificateholders. Such transfer and assignment includes
all scheduled payments of interest and principal due after the Cut-off Date
(whether or not received) and all payments of interest and principal received
by the Depositor or the Servicer on or with respect to the Mortgage Loans
after the Cut-off Date. In connection with such transfer and assignment of all
interest and principal due with respect to the Mortgage Loans after the
Cut-off Date, the Depositor shall make a cash deposit to the Collection
Account on the Closing Date in an amount equal to the Cash Deposit. The
Depositor, concurrently with the execution and delivery hereof, does also
hereby sell, transfer, assign, set over and otherwise convey to the Trustee
without recourse (except to the extent provided herein) all the right, title
and interest of the Depositor in, to and under the Mortgage Loan Purchase and
Sale Agreement (other than its rights to indemnification pursuant to Section 4
thereof and rights to recovery of costs under Section 7 thereof). The
Depositor shall cause the Reserve Accounts to be transferred to and held in
the name of the Servicer on behalf of the Trustee as successor to the Mortgage
Loan Seller and ____________________
In connection with the transfer and assignment of Mortgage
Loans other than the ___________ Interest, the Depositor does hereby deliver
to, and deposit with, the Trustee, with a copy to the Servicer, the following
documents or instruments with respect to each Mortgage Loan so assigned:
(i) the original of the related Note, endorsed by the
Mortgage Loan Seller (or in the case of the seven
Mortgage Loans originated by ULLICO, by ULLICO) in
blank in the following form: "Pay to the order of
________________, without recourse" which the
Trustee or its designee is authorized to complete
and which Note and all endorsements thereof shall
show a complete chain of endorsement from the
Originator to the Mortgage Loan Seller;
(ii) the related original recorded Mortgage or a copy
thereof certified by the related title insurance
company, public recording office or closing agent
to be in the form in which executed or submitted
for recording, the related original recorded
Assignment of Mortgage from ________________
________ to the Mortgage Loan Seller or a copy
thereof certified by the related title
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insurance company, public recording office or closing
agent to be in the form in which executed or
submitted for recording and the related original
Assignment of Mortgage 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
recording information which is not yet available to
the Mortgage Loan Seller, is in suitable form for
recordation in the jurisdiction in which the
related Mortgaged Property is located); provided,
that with respect to each of the seven Mortgage
Loans originated by ULLICO, there will be the
related original Assignment of Mortgage executed by
ULLICO 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 recording information which is not yet
available to the Mortgage Loan Seller, is in
suitable form for recordation in the jurisdiction
in which the related Mortgaged Property is
located);
(iii) if the related security agreement is separate from
the Mortgage, the original security agreement or a
counterpart thereof, and if the security agreement
is not assigned under the Assignments of Mortgage
described in clause (ii) above, the related
original assignment of such security agreement from
____________________ to the Mortgage Loan Seller or
a counterpart thereof and the related original
assignment of such security agreement executed by
the Mortgage Loan Seller in blank which the Trustee
or its designee is authorized to complete;
(iv) 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 from
____________________ 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); provided, that with respect
to each of the seven Mortgage Loans originated by
ULLICO, there will be a copy of each Form UCC-2 or
UCC-3 Assignment, if any, of such financing
statement executed by ULLICO in blank which the
Trustee or its designee is authorized to complete
(and but for the insertion of the name of 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);
(v) the related original of the Loan Agreement, if any,
relating to such Mortgage Loan or a counterpart
thereof;
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(vi) the related original lender's title insurance
policy (or the original pro forma title insurance
policy), together with any endorsements thereto;
(vii) if any related Assignment of Leases, Rents and
Profits is separate from the Mortgage, the original
recorded Assignment of Leases, Rents and Profits or
a copy thereof certified by the related title
insurance company, public recording office or
closing agent to be in the form in which executed
or submitted for recording, the related original
recorded reassignment of such instrument, if any,
from _________ to the Mortgage Loan Seller or a
copy thereof certified by the related title
insurance company, public recording office or
closing agent to be in the form in which executed
or submitted for recording and the related original
reassignment of such instrument, if any, 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 recording information
which is not yet available to the Mortgage Loan
Seller, is in suitable form for recordation in the
jurisdiction in which the related Mortgaged
Property is located) (any of which reassignments,
however, may be included in a related Assignment of
Mortgage and need not be a separate instrument);
(viii) copies of the original Environmental Reports with
respect to the Mortgaged Property made in
connection with origination of such Mortgage Loan;
(ix) if any related assignment of contracts is separate
from the Mortgage, the original assignment of
contracts or a counterpart thereof, and if the
assignment of contracts is not assigned under the
Assignments of Mortgage described in clause (ii)
above, the related original reassignment of such
instrument from ____________________ to the
Mortgage Loan Seller or a counterpart thereof and
the related original reassignment of such
instrument executed by the Mortgage Loan Seller in
blank which the Trustee or its designee is
authorized to complete;
(x) with respect to the related Reserve Accounts, if
any, a copy of the original of any separate
agreement with respect thereto between the related
Borrower and the Originator;
(xi) the original letter of credit, if any, with respect
thereto, together with any and all amendments
thereto, including, without limitation, any
amendment which entitles the Servicer to draw upon
such letter of credit on behalf of the Trustee for
the benefit of the Certificateholders,
and the original of each instrument or other item
of personal property given as security for a
Mortgage Loan possession of which by a secured
party is necessary to a secured party's valid,
perfected, first priority security interest
therein, together with all assignments or
endorsements thereof necessary to entitle
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the Servicer to enforce a valid, perfected, first
priority security interest therein on behalf of the
Trustee for the benefit of the Certificateholders;
(xii) with respect to the related Reserve Accounts, if
any, a copy of the UCC-1 financing statements, if
any, submitted for filing with respect to the
Mortgage Loan Seller's security interest in such
Reserve Accounts and all funds contained therein,
together with a copy of each Form UCC-2 or UCC-3
assignment, if any, of such financing statement to
the Mortgage Loan Seller from ____________________
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);
provided, that with respect to any Mortgage Loan
originated by ULLICO, there will be a copy of each
Form UCC-2 or UCC-3 Assignment, if any, of such
financing statement executed by ULLICO 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); and
(xiii) copies of any and all amendments, modifications and
supplements to, and waivers related to, any of the
foregoing.
In connection with the transfer and assignment of the
___________ Interest, the Depositor does hereby deliver to the Trustee, with a
copy to the Servicer, with respect to the Interest, (i) the
_________________ Certificate, (ii) a copy of the Agreement and (iii) copies
of all releases of security interests relating to the Interest, such that the
Trustee shall hold good and valid title to the ________ Interest,
free and clear of any and all liens, encumbrances, pledges, charges or security
interests of any nature.
On or promptly following the Closing Date, the Trustee or
Custodian, as applicable, shall, to the extent possession thereof has been
delivered to it, complete any Assignment of Mortgage delivered pursuant to
clause (ii) above, any assignment of security agreement delivered pursuant to
clause (iii) above, any Form UCC-2 or UCC-3 assignment delivered pursuant to
clause (iv) and (xii) above, any reassignment of Assignment of Leases, Rents
and Profits delivered pursuant to clause (vii) above and any reassignment of
assignment of contracts delivered pursuant to clause (ix) above, in each case,
by inserting the name of the Trustee as assignee and delivering to the
Servicer (1) for recordation, (a) each Assignment of Mortgage referred to in
Section 2.1(ii) which has not yet been submitted for recordation and (b) each
reassignment of Assignment of Leases, Rents and Profits referred to in Section
2.1(vii) (if not otherwise included in the related Assignment of Mortgage)
which has not yet been submitted for recordation; and (2) for filing, each
UCC-2 or UCC-3 financing statement assignment
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referred to in Section 2.1(iv) and (xii) which has not yet been submitted for
filing. On or promptly following the Closing Date, the Trustee or Custodian,
as applicable, shall, to the extent possession thereof has been delivered to
it, complete the endorsement of the Note by inserting the name of the Trustee
as endorsee. The Servicer shall, upon delivery, promptly submit for recording
or filing, as the case may be, in the appropriate public recording or filing
office, each such document. In the event that any such document is lost or
returned unrecorded because of a defect therein, the Servicer shall use its
best efforts to promptly prepare a substitute document for signature by the
Depositor, Mortgage Loan Seller or ULLICO, as applicable, and thereafter the
Servicer shall cause each such document to be duly recorded. The Servicer
shall, promptly upon receipt of the original of each such recorded document
(and in no event later than _____ Business Days following such receipt),
deliver such original to the Custodian. Notwithstanding anything to the
contrary contained in this Section 2.1, in those instances where the public
recording office retains the original Assignment of Mortgage or reassignment
of Assignment of Leases, Rents and Profits, if applicable, after any such
document has been recorded, the obligations hereunder of the Depositor shall
be deemed to have been satisfied upon delivery to the Custodian of a copy of
such Assignment of Mortgage or reassignment of Assignment of Leases, Rents and
Profits, if applicable, certified by the public recording office to be a true
and complete copy of the recorded original thereof. If a pro forma title
insurance policy has been delivered to the Custodian in lieu of an original
title insurance policy, the Depositor or the Servicer will promptly deliver to
the Custodian the related original title insurance policy upon receipt
thereof. The Depositor or the Servicer shall promptly cause the UCC-1s, UCC-2s
and UCC-3s referred to in Section 2.1(iv) and (xii) to be filed in the
applicable public recording or filing office and upon filing will promptly
deliver to the Custodian the related UCC-1, UCC-2 or UCC-3 with evidence of
filing thereon.
All original documents relating to the Mortgage Loans which
are not delivered to the Custodian are and shall be held by the Trustee or the
Servicer, as the case may be, in trust for the benefit of the
Certificateholders. In the event that any such original document is required
pursuant to the terms of this Section to be a part of a Trustee Mortgage File,
such document shall be delivered promptly to the Custodian.
If the Depositor cannot deliver any original or certified recorded document
described in Section 2.1 on the Closing Date, the Depositor shall use its best
efforts, promptly upon receipt thereof and in any case not later than __ days
from the Closing Date, to deliver or cause to be delivered such original or
certified recorded documents to the Custodian (unless the Depositor is delayed
in making such delivery by reason of the fact that such documents shall not
have been returned by the appropriate recording office, in which case the
Depositor or the Servicer shall notify the Custodian and the Trustee in
writing of such delay and shall deliver such documents to the Custodian
promptly upon the Depositor's or the Servicer's receipt thereof).
SECTION 2.2. Acceptance by the Custodian and the Trustee.
By its execution and delivery of this Agreement, the Trustee
acknowledges the assignment to it of the Mortgage Loans in good faith without
notice of adverse claims and declares that the Custodian holds and will hold
such documents and all others delivered to it
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constituting the Trustee Mortgage File (to the extent the documents
constituting the Trustee Mortgage File are actually delivered to the
Custodian) for any Mortgage Loan assigned to the Trustee hereunder in trust,
upon the conditions herein set forth, for the use and benefit of all present
and future Certificateholders. The Trustee agrees to review each Trustee
Mortgage File within __ days after the later of (a) the Trustee's receipt of
such Trustee Mortgage File or (b) execution and delivery of this Agreement, to
ascertain that all documents referred to in Section 2.1 above (as identified
to it in writing by the Depositor or the Servicer) and any original recorded
documents referred to in the last sentence of Section 2.1 to be included in
the delivery of a Trustee Mortgage File, have been received, have been
executed, appear on their face to be what they purport to be, purport to be
recorded or filed (as applicable) and have not been torn, mutilated or
otherwise defaced, and that such documents relate to the Mortgage Loans
identified in the Mortgage Loan Schedule. In so doing, the Trustee may rely on
the purported due execution and genuineness of any such document and on the
purported genuineness of any signature thereon. If, at the conclusion of such
review, any document or documents constituting a part of a Trustee Mortgage
File have not been executed or received, have not been recorded or filed (if
required), are unrelated to the Mortgage Loans identified in the Mortgage Loan
Schedule, appear on their face not to be what they purport to be or have been
torn, mutilated or otherwise defaced, the Trustee shall promptly so notify the
Depositor and the Mortgage Loan Seller by providing a written report, setting
forth, for each affected Mortgage Loan, with particularity, the nature of the
defective or missing document. Neither the Servicer nor the Trustee shall be
responsible for any loss, cost, damage or expense to the Trust Fund resulting
from any failure to receive any document constituting a portion of a Trustee
Mortgage File noted on such a report or for any failure by the Depositor to
use its best efforts to deliver any such document.
In reviewing any Trustee Mortgage File pursuant to the
preceding paragraph or Section 2.1, the Trustee will have no responsibility to
determine whether any document or opinion is legal, valid, binding or
enforceable, whether the text of any assignment or endorsement is in proper or
recordable form (except, if applicable, to determine whether the Trustee is
the assignee or endorsee), whether any document has been recorded in
accordance with the requirements of any applicable jurisdiction, whether a
blanket assignment is permitted in any applicable jurisdiction, or whether any
Person executing any document or rendering any opinion is authorized to do so
or whether any signature thereon is genuine.
The Trustee shall hold that portion of the Trust Fund
delivered to the Trustee consisting of "instruments"(as such term is defined
in Section 9-105(i) of the Uniform Commercial Code as in effect in Illinois on
the date hereof) in Illinois and, except as set forth in Section 3.11 or as
otherwise specifically provided in this Agreement, shall not remove such
instruments from Illinois unless it receives an Opinion of Counsel (obtained
and delivered at the expense of the Person requesting the removal of such
instruments from Illinois) that in the event the transfer of the Mortgage
Loans to the Trustee is deemed not to be a sale, after such removal, the
Trustee will possess a first priority perfected security interest in such
instruments.
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SECTION 2.3. Representations and Warranties of the Depositor.
(a) The Depositor hereby represents and warrants that:
(i) The Depositor is a corporation duly organized
validly existing and in good standing under the
laws of the State of Delaware;
(ii) The Depositor has taken all necessary action to
authorize the execution, delivery and performance
of this Agreement by it, and has the power and
authority to execute, deliver and perform this
Agreement and all the transactions contemplated
hereby, including, but not limited to, the power
and authority to sell, assign and transfer the
Mortgage Loans in accordance with this Agreement;
(iii) This Agreement has been duly and validly
authorized, executed and delivered by the Depositor
and assuming the due authorization, execution and
delivery of this Agreement by each other party
hereto, this Agreement and all of the obligations
of the Depositor hereunder are the legal, valid and
binding obligations of the Depositor, enforceable
in accordance with the terms of this Agreement,
except as such enforcement may be limited by
bankruptcy, insolvency, reorganization,
liquidation, receivership, moratorium or other laws
relating to or affecting creditors' rights
generally, or by general principles of equity
(regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(iv) The execution and delivery of this Agreement and
the performance of its obligations hereunder by the
Depositor will not conflict with any provision of
its certificate of incorporation or bylaws, or any
law or regulation to which the Depositor is
subject, or conflict with, result in a breach of or
constitute a default under (or an event which, with
notice or lapse of time or both, would constitute a
default under) any of the terms, conditions or
provisions of any agreement or instrument to which
the Depositor is a party or by which it is bound,
or any order or decree applicable to the Depositor,
or result in the creation or imposition of any lien
on any of the Depositor's assets or property which
would materially and adversely affect the ability
of the Depositor to carry out the transactions
contemplated by this Agreement. The Depositor has
obtained any consent, approval, authorization or
order of any court or governmental agency or body
required for the execution, delivery and
performance by the Depositor of this Agreement;
(v) The certificate of incorporation of the Depositor
provides that the Depositor is permitted to engage
in only the following activities:
(A) to acquire, own, hold, sell, transfer,
assign, pledge, finance, refinance and
otherwise deal with (I) loans secured by
first or
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second mortgages, deeds of trust or
similar liens on residential, commercial
or mixed commercial and residential
properties or shares issued by private
non-profit housing corporations, (II) any
participation interest in or security
based on or backed by any of the foregoing
(the loans described in clause (A)(I) and
the participation interests described in
clause (A)(II), collectively, "mortgage
loans"), or (III) various receivables
including, but not limited to, retail
automotive installment sale contracts or
loans or automotive leases, consumer or
commercial loans or leases, credit card
accounts, mobile home loans or insurance
policy loans ( "receivables");
(B) to authorize and issue one or more series
(each, a "series ") of pass-through
securities ( "certificates") pursuant to
pooling and servicing agreements (each, a
"pooling and servicing agreement"), each
of which series (I) represents ownership
interests in mortgage loans or
receivables, related property and/or
collections in respect thereof, and (II)
may be structured to contain one or more
classes or certificates, each class having
the characteristics specified in the
related pooling and servicing agreement,
and to acquire, own, hold, sell, transfer,
assign, pledge, finance or refinance one
or more certificates or classes of
certificates of any series; and
(C) to engage in any acts and activities and
exercise any powers permitted to
corporations under the laws of the State
of Delaware which are incidental to, or
connected with, the foregoing, and
necessary, suitable or convenient to
accomplish any of the foregoing;
(vi) There is no action, suit or proceeding pending
against the Depositor in any court or by or before
any other governmental agency or instrumentality
which would materially and adversely affect the
ability of the Depositor to carry out its
obligations under this Agreement; and
(vii) The Trustee, if not the owner of the Mortgage
Loans, will have a valid and perfected security
interest of first priority in each of the Mortgage
Loans and any proceeds thereof.
(b) The Depositor hereby represents and warrants with
respect to each Mortgage Loan that:
(i) Immediately prior to the transfer and assignment to
the Trustee, the related Note and the related
Mortgage and the ___________ Certificate were not
subject to an assignment or pledge, and the Depositor
had good title to, and was the sole owner of, such
Mortgage Loan and had full right
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to transfer and sell such Mortgage Loan to the
Trustee free and clear of any encumbrance, lien,
pledge, charge, claim or security interest;
(ii) The Depositor is transferring such Mortgage Loan
free and clear of any and all liens, pledges,
charges or security interests of any nature
encumbering such Mortgage Loan ;
(iii) The related Assignment of Mortgage constitutes the
legal, valid and binding assignment of the related
Mortgage from the Depositor to the Trustee, and any
related reassignment of Assignment of Leases, Rents
and Profits constitutes the legal, valid and
binding assignment of any related Assignment of
Leases, Rents and Profits from the Depositor to the
Trustee;
(iv) No claims have been made by the Depositor under the
related lender's title insurance policy, and the
Depositor has not done, by act or omission,
anything which would impair the coverage of such
lender's title insurance policy; and
(v) To the best of the Depositor's knowledge, all of
the representations and warranties of ___________ or
the Mortgage Loan Seller, as applicable, contained
in the Mortgage Loan Purchase and Sale Agreement are
true and correct as of the date made.
(c) It is understood and agreed that the representations and
warranties set forth in this Section 2.3 shall survive delivery of the
respective Trustee Mortgage Files to the Trustee until the termination of this
Agreement, and shall inure to the benefit of the Certificateholders, the
Servicer and the Special Servicer.
(d) Upon discovery by the Custodian, the Servicer, the
Special Servicer or the Trustee of a breach of the representation and warranty
set forth in Section 2(c)(xli) of the Mortgage Loan Purchase and Sale
Agreement or that any Mortgage Loan otherwise fails to constitute a Qualified
Mortgage, such Person shall give prompt notice thereof to the Mortgage Loan
Seller and ___________ , and the Mortgage Loan Seller or _____________ , as
applicable, shall correct such condition or repurchase such Mortgage Loan at
the Repurchase Price within __ days of discovery of such failure; it being
understood and agreed that none of such Persons has an obligation to conduct
any investigation with respect to such matters.
(e) Upon discovery by the Custodian, the Servicer, the
Special Servicer or the Trustee of a breach of any representation or warranty
of the Mortgage Loan Seller or in the Mortgage Loan Purchase and Sale
Agreement (other than the representation set forth in Section 2(c)(xli)
thereof, but including without limitation the representation as to
Loan-to-Value Ratio and Debt Service Coverage Ratio set forth in Section
2(c)xxiii thereof), with respect to any Mortgage Loan, or that any document
required to be included in the Trustee Mortgage File with respect to a
Mortgage Loan does not conform to the requirements of Section 2.1, such Person
shall give prompt notice thereof to the Mortgage Loan Seller and
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_____, and the Mortgage Loan Seller or __________, as applicable, shall, to
the extent the Mortgage Loan Seller or ___________ is obligated to cure such
breach or repurchase the related Mortgage Loan under the terms of the Mortgage
Loan Purchase and Sale Agreement, either cure such breach or repurchase such
Mortgage Loan at the Repurchase Price within __ days of the receipt of notice
of such breach, as the same may be extended, all pursuant to and as more
particularly described in the Mortgage Loan Purchase and Sale Agreement; it
being understood and agreed that none of the Custodian, the Servicer, the
Special Servicer and the Trustee has an obligation to conduct any
investigation with respect to such matters (except, in the case of the Trustee
Mortgage Files, to the extent provided in Sections 2.1 and 2.2).
(f) Upon receipt by the Servicer from the Depositor,
____________________ or the Mortgage Loan Seller of the Repurchase Price for a
repurchased Mortgage Loan, the Servicer shall deposit such amount in the
Collection Account, and the Trustee, pursuant to Section 3.11, shall, upon
receipt of a certificate of a Servicing Officer certifying as to the receipt
by the Servicer of the Repurchase Price and the deposit of the Repurchase
Price into the Collection Account pursuant to this Section 2.3(f), release or
cause to be released to the Depositor, ____________________ or the Mortgage
Loan Seller, as applicable, the related Trustee Mortgage File and shall
execute and deliver such instruments of transfer or assignment, in each case
without recourse, representation or warranty, as shall be prepared by the
Servicer to vest in the Depositor, ____________________ or the Mortgage Loan
Seller, as applicable, any Mortgage Loan released pursuant hereto, and any
rights of the Depositor in, to and under the Mortgage Loan Purchase and Sale
Agreement as it related to such Mortgage Loan that were initially transferred
to the Trust Fund under Section 2.1, and the Trustee and the Servicer shall
have no further responsibility with regard to such Trustee Mortgage File or
the related Mortgage Loan.
(g) In the event that the Mortgage Loan Seller incurs any
expense in connection with curing a breach of a representation or warranty
pursuant to Section 2.3(d) and (e) which also constitutes a default under the
related Mortgage Loan, the Mortgage Loan Seller shall have a right, and the
Mortgage Loan Seller shall be subrogated to the rights of the Trustee, as
successor to the mortgagee, to recover the amount of such expenses from the
related Borrower. The Servicer shall use reasonable efforts in recovering, or
assisting the Mortgage Loan Seller in recovering, from such Borrower the
amount of any such expenses.
(h) In the event that any litigation is commenced which
alleges facts which, in the judgment of the Depositor, could constitute a
breach of any of the Depositor's representations and warranties relating to
the Mortgage Loans, the Depositor hereby reserves the right to conduct the
defense of such litigation at its expense.
(i) The Servicer shall use its best efforts, in accordance
with the Servicing Standard, to enforce the obligations of the Mortgage Loan
Seller and __________ to cure or repurchase any Mortgage Loan which is
discovered to be a "Defective Mortgage Loan" (as such term is defined in the
Mortgage Loan Purchase and Sale Agreement) under the terms of the Mortgage
Loan Purchase and Sale Agreement.
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SECTION 2.4. Representations, Warranties and Covenants of
the Servicer and the Special Servicer.
(a) The Servicer hereby represents, warrants and covenants
that as of the Closing Date, or as of such date specifically provided herein:
(i) The Servicer is a _______________, duly organized,
validly existing and in good standing under the
laws of the State of and has all licenses necessary
to carry on its business as now being conducted or
is in compliance with the laws of each state in
which any Mortgaged Property is located to the
extent necessary to ensure the enforceability of
each Mortgage Loan in accordance with the terms of
this Agreement;
(ii) The Servicer has the full partnership power,
authority and legal right to execute and deliver
this Agreement and to perform in accordance
herewith; the execution and delivery of this
Agreement by the Servicer and its performance and
compliance with the terms of this Agreement do not
violate the Servicer's certificate of
__________________ or constitute a default (or an
event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the
breach of, any material contract, agreement or
other instrument to which the Servicer is a party
or which may be applicable to the Servicer or any
of its assets, which default or breach would have
consequences that would materially and adversely
affect the financial condition or operations of the
Servicer or its properties taken as a whole or
impair the ability of the Trust Fund to realize on
the Mortgage Loans;
(iii) This Agreement has been duly and validly
authorized, executed and delivered by the Servicer
and, assuming due authorization, execution and
delivery by the other parties hereto, constitutes a
legal, valid and binding obligation of the
Servicer, enforceable against it in accordance with
the terms of this Agreement, except as such
enforcement may be limited by bankruptcy,
insolvency, reorganization, liquidation,
receivership, moratorium or other laws relating to
or affecting creditors' rights generally, or by
general principles of equity (regardless of whether
such enforceability is considered in a proceeding
in equity or at law);
(iv) The Servicer is not in violation of, and the
execution and delivery of this Agreement by the
Servicer and its performance and compliance with
the terms of this Agreement will not constitute a
violation with respect to, any order or decree of
any court or any order or regulation of any
federal, state, municipal or governmental agency
having jurisdiction, or result in the creation or
imposition of any lien, charge or encumbrance
which, in any such event, would have consequences
that would materially and adversely affect the
financial condition or operations of the Servicer
or its
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properties taken as a whole or impair the ability of
the Trust Fund to realize on the Mortgage Loans;
(v) There is no action, suit or proceeding pending or,
to the knowledge of the Servicer, threatened,
against the Servicer which, either in any one
instance or in the aggregate, would result in any
material adverse change in the business, operations
or financial condition of the Servicer or would, if
adversely determined, materially impair the ability
of the Servicer to perform under the terms of this
Agreement or which would draw into question the
validity of this Agreement or the Mortgage Loans or
of any action taken or to be taken in connection
with the obligations of the Servicer contemplated
herein;
(vi) No consent, approval, authorization or order of, or
registration or filing with, or notice to any court
or governmental agency or body is required for the
execution, delivery and performance by the Servicer
of, or compliance by the Servicer with, this
Agreement or, if required, such approval has been
obtained prior to the Cut-off Date, except to the
extent that the failure of the Servicer to be
qualified as a ____________ __________ or licensed
in one or more states is not necessary for the
enforcement of the Mortgage Loans; and
(vii) The Servicer is maintaining a fidelity bond and
errors and omissions coverage in accordance with
the requirements of Section 3.8(c) hereof.
(b) The Special Servicer hereby represents, warrants and
covenants that as of the Closing Date, or as of such date specifically
provided herein:
(i) The Special Servicer is a corporation, duly
organized, validly existing and in good standing
under the laws of the State of Florida and has all
licenses necessary to carry on its business as now
being conducted or is in compliance with the laws
of each state in which any Mortgaged Property is
located to the extent necessary to ensure the
enforceability of each Specially Serviced Mortgage
Loan in accordance with the terms of this
Agreement;
(ii) The Special Servicer has the full corporate power,
authority and legal right to execute and deliver
this Agreement and to perform in accordance
herewith; the execution and delivery of this
Agreement by the Special Servicer and its
performance and compliance with the terms of this
Agreement do not violate the Special Servicer's
certificate of incorporation or constitute a
default (or an event which, with notice or lapse of
time, or both, would constitute a default) under,
or result in the breach of, any material contract,
agreement or other instrument to which the Special
Servicer is a party or which may be applicable to
the Special Servicer or any of its assets, which
default or breach would have consequences that
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would materially and adversely affect the condition
(financial or otherwise) or operations of the
Special Servicer or its properties, taken as a
whole, or impair the ability of the Trust Fund to
realize on the Specially Serviced Mortgage Loans;
(iii) This Agreement has been duly and validly
authorized, executed and delivered by the Special
Servicer and, assuming due authorization, execution
and delivery by the other parties hereto,
constitutes a legal, valid and binding obligation
of the Special Servicer, enforceable against it in
accordance with the terms of this Agreement, except
as such enforcement may be limited by bankruptcy,
insolvency, reorganization, liquidation,
receivership, moratorium or other laws relating to
or affecting creditors' rights generally, or by
general principles of equity (regardless of whether
such enforceability is considered in a proceeding
in equity or at law);
(iv) The Special Servicer is not in violation of, and
the execution and delivery of this Agreement by the
Special Servicer and its performance and compliance
with the terms of this Agreement will not
constitute a violation with respect to, any order
or decree of any court or any order or regulation
of any federal, state, municipal or governmental
agency having jurisdiction, or result in the
creation or imposition of any lien, charge or
encumbrance which, in any such event, would have
consequences that would materially and adversely
affect the condition (financial or otherwise) or
operations of the Special Servicer or its
properties taken as a whole or impair the ability
of the Trust Fund to realize on the Specially
Serviced Mortgage Loans;
(v) There is no action, suit or proceeding pending or,
to the knowledge of the Special Servicer,
threatened, against the Special Servicer which,
either in any one instance or in the aggregate,
would result in any material adverse change in the
business, operations or financial condition of the
Special Servicer or would, if adversely determined,
materially impair the ability of the Special
Servicer to perform under the terms of this
Agreement or which would draw into question the
validity of this Agreement or the Specially
Serviced Mortgage Loans or of any action taken or
to be taken in connection with the obligations of
the Special Servicer contemplated herein;
(vi) No consent, approval, authorization or order of, or
registration or filing with, or notice to any court
or governmental agency or body is required for the
execution, delivery and performance by the Special
Servicer of, or compliance by the Special Servicer
with, this Agreement or, if required, such approval
has been obtained prior to the Cut-off Date, except
to the extent that the failure of the Special
Servicer to be qualified as a __________
___________ or licensed in one or more states is
not
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necessary for the enforcement of the Specially
Serviced Mortgage Loans; and
(vii) The Special Servicer is maintaining a fidelity bond
and errors and omissions coverage in accordance
with the requirements of Section 3.8(c) hereof.
(c) It is understood and agreed that the representations and
warranties set forth in this Section shall survive delivery of the Trustee
Mortgage Files to the Trustee or the Custodian on behalf of the Trustee until
the termination of this Agreement, and shall inure to the benefit of the
Trustee and the Depositor. Upon discovery by the Depositor, the Servicer, the
Special Servicer or a Responsible Officer of the Trustee (or upon written
notice thereof from any Certificateholder) of a breach of any of the
representations and warranties set forth in this Section which materially and
adversely affects the interests of the Certificateholders, the Servicer, the
Special Servicer or the Trustee with respect to any Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other parties
hereto.
SECTION 2.5. Execution and Delivery of Certificates;
Issuance of Lower-Tier Regular Interests.
The Trustee acknowledges the assignment to it of the
Mortgage Loans and the delivery to it of the Trustee Mortgage Files to the
Custodian (to the extent the documents constituting the Trustee Mortgage Files
are actually delivered to the Custodian), subject to the provisions of Section
2.1 and Section 2.2 and, concurrently with such delivery, (i) acknowledges the
issuance of and hereby declares that it holds the Lower-Tier Regular Interests
on behalf of the Upper-Tier REMIC and the Holders of the Regular Certificates
and the Class __ Certificates and (ii) has caused to be executed and caused to
be authenticated and delivered to or upon the order of the Depositor, or as
directed by the terms of this Agreement, Class Certificates in authorized
denominations, in each case registered in the names set forth in such order of
the Depositor or as so directed in this Agreement and duly authenticated by
the Authenticating Agent, which Certificates (described in the preceding
clause (ii)) evidence ownership of the entire Trust Fund.
SECTION 2.6. Miscellaneous REMIC Provisions.
(a) The Class ___, Class ___, Class ___, Class ___, Class
___, Class ___, Class ___, Class ___, Class ___ and Class ___ Interests are
hereby designated as "regular interests" in the Lower-Tier REMIC within the
meaning of Section 860G(a)(1) of the Code, and the Class __ Certificates are
hereby designated as the sole class of "residual interests" in the Lower-Tier
REMIC within the meaning of Section 860G(a)(2) of the Code. The Class ___,
Class ___, Class ___, Class __, Class __, Class __, Class __, Class __, Class
__, Class __, Class ___ and Class ___ Certificates are hereby designated as
"regular interests" in the Upper-Tier REMIC within
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the meaning of Section 860G(a)(1) of the Code and the Class __ Certificates
are hereby designated as the sole class of "residual interests" in the
Upper-Tier REMIC within the meaning of Section 860G(a)(2) of the Code. The
Closing Date is hereby designated as the "Startup Day" of the Lower-Tier REMIC
and the Upper-Tier REMIC within the meaning of Section 860G(a)(9) of the Code.
The "latest possible maturity date" of the Lower-Tier Regular Interests and
the Regular Certificates for purposes of Code Section 860G(a)(1) is the
Scheduled Final Distribution Date. The initial Certificate Balance of each
Class of Lower-Tier Regular Interests is equal to the Certificate Balance of
the Related Class of Certificates. The pass-through rate of each Class of
Lower- Tier Regular Interests is a per annum rate equal to the Lower-Tier
Pass-Through Rate.
(b) None of the Mortgage Loan Seller, Depositor, Trustee or
Servicer shall enter into any arrangement by which the Trust Fund will receive
a fee or other compensation for services other than as specifically
contemplated herein.
SECTION 2.7. Documents Not Delivered to Custodian.
All original documents relating to the Mortgage Loans which
are part of the Servicer Mortgage File are and shall be held by the Servicer,
in trust for the benefit of the Trustee on behalf of the Certificateholders.
The legal ownership of all records and documents with respect to each Mortgage
Loan prepared by or which come into the possession of the Servicer shall
immediately vest in the Trustee, in trust for the benefit of the
Certificateholders.
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ARTICLE III
ADMINISTRATION AND SERVICING
OF THE MORTGAGE LOANS
SECTION 3.1. Servicer to Act as Servicer; Special Servicer
to Act as Special Servicer; Administration of
the Mortgage Loans.
(a) The Servicer and the Special Servicer, each as an
independent contractor, shall service and administer the Mortgage Loans (or in
the case of the Special Servicer, the Specially Serviced Mortgaged Loans and
the REO Mortgage Loans) on behalf of the Trust Fund solely in the best
interests of, and for the benefit of, all of the Certificateholders and the
Trustee (as trustee for the Certificateholders) in accordance with the terms
of this Agreement and the respective Mortgage Loans. In furtherance of, and to
the extent consistent with, the foregoing, and except to the extent that this
Agreement provides for a contrary specific course of action, each of the
Servicer and the Special Servicer shall service and administer each Mortgage
Loan in the same manner in which, and with the same care, skill, prudence and
diligence with which, it services and administers similar mortgage loans for
other third-party portfolios, giving due consideration to customary and usual
standards of practice of prudent institutional commercial mortgage loan
servicers used with respect to loans comparable to the Mortgage Loans, and
taking into account its other obligations hereunder, but without regard to:
(i) any other relationship that the Servicer, the
Special Servicer, any sub-servicer or any Affiliate
of the Servicer, the Special Servicer or any
subservicer may have with the related Borrower or
any Affiliate of such Borrower;
(ii) the ownership of any Certificate by the Servicer,
the Special Servicer or any Affiliate of either;
(iii) the Servicer's, the Trustee's or the Fiscal Agent's
obligation to make P&I Advances or Property
Advances or to incur servicing expenses with
respect to such Mortgage Loan;
(iv) the Servicer's, the Special Servicer's or any
sub-servicer's right to receive compensation for
its services hereunder or with respect to any
particular transaction; or
(v) the ownership or servicing or management for others
by the Servicer, the Special Servicer or any
sub-servicer, of any other mortgage loans or
property.
The standards set forth above with respect to the conduct of
the Servicer and the Special Servicer in the performance of their obligations
under this Agreement is herein referred to as the "Servicing Standard."
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The Servicer's or the Special Servicer's liability for
actions and omissions in its capacity as Servicer or Special Servicer, as the
case may be, hereunder is limited as provided herein (including, without
limitation, pursuant to Section 6.3 hereof). To the extent consistent with the
foregoing and subject to any express limitations set forth in this Agreement,
the Servicer and the Special Servicer shall seek to maximize the timely and
complete recovery of principal and interest on the Notes; provided, however,
that nothing herein contained shall be construed as an express or implied
guarantee by the Servicer or the Special Servicer of the collectability of the
Mortgage Loans. Subject only to the above-described Servicing Standard and
the terms of this Agreement and of the respective Mortgage Loans, the Servicer
and the Special Servicer shall have full power and authority, acting alone or
through sub-servicers (subject to paragraph (c) of this Section 3.1 and to
Section 3.2), to do or cause to be done any and all things in connection with
such servicing and administration which they may deem necessary or desirable.
Without limiting the generality of the foregoing, the Servicer and the Special
Servicer shall, and each is hereby authorized and empowered by the Trustee to,
with respect to each Mortgage Loan and the related Mortgaged Property,
prepare, execute and deliver, on behalf of the Certificateholders and the
Trustee or any of them, any and all financing statements, continuation
statements and other documents or instruments necessary to maintain the lien
on the related Mortgaged Property and related collateral; any modifications,
waivers, consents or amendments to or with respect to any Mortgage Loan or any
documents contained in the related Mortgage File; and any and all instruments
of satisfaction or cancellation, or of partial or full release or discharge,
and all other comparable instruments, if, in its reasonable judgment, such
action is in the best interests of the Certificateholders and is in accordance
with, or is required by, this Agreement. Notwithstanding the foregoing,
neither the Servicer nor the Special Servicer shall modify, amend, waive or
otherwise consent to the change of the stated Maturity Date of any Mortgage
Loan, the payment of principal of, or interest or Default Interest on, any
Mortgage Loan, or any other term of a Mortgage Loan, unless (a) such
modification, amendment, waiver or consent is not a "significant modification"
under Section 1001 of the Code, including proposed, temporary or final
Treasury regulations thereunder, or Treasury Regulations Section
1.860G-2(b)(3) (other than clause (i) thereof), (b) to the extent such
modification, amendment, waiver or consent would constitute a "significant
modification" under the preceding clause (a), such Mortgage Loan is in default
or a default with respect thereto is reasonably foreseeable or (c) permitted
by Section 3.10 hereof. The Servicer and the Special Servicer shall service
and administer the Mortgage Loans in accordance with applicable state and
federal law and shall provide to the Borrowers any reports required to be
provided to them thereby. Subject to Section 3.11, the Trustee shall, upon the
receipt of a written request of a Servicing Officer, execute and deliver to
the Servicer and the Special Servicer any powers of attorney and other
documents prepared by the Servicer or the Special Servicer and necessary or
appropriate (as certified in such written request) to enable the Servicer and
the Special Servicer to carry out their servicing and administrative duties
hereunder; provided, however, that the Trustee shall not be liable for any
actions of the Servicer or Special Servicer under any such powers of attorney.
(b) Unless otherwise provided in the related Note, the
Servicer shall apply any partial Principal Prepayment received on a Mortgage
Loan on a date other than a Due Date to the principal balance of such Mortgage
Loan as of the Due Date immediately following the date of receipt of such
partial Principal Prepayment.
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(c) With respect to each Mortgage Loan that provides for
prepayment at the option of the mortgagee, the Servicer or the Special
Servicer, as applicable, shall exercise such option at the earliest possible
date as provided in the related Note and Mortgage Loan Documents.
(d) The Servicer or the Special Servicer may enter into
sub-servicing agreements with third parties with respect to any of its
respective obligations hereunder, provided that (1) any such agreement shall
be consistent with the provisions of this Agreement and (2) no sub-servicer
retained by the Servicer or the Special Servicer shall grant any modification,
waiver or amendment to any Mortgage Loan without the approval of the Servicer
or the Special Servicer, as applicable, which approval shall be given or
withheld in accordance with the procedures set forth in Section 3.10(a), and
(3) such agreement shall be consistent with the standards set forth in Section
3.1(a). Any such sub-servicing agreement may permit the sub-servicer to
delegate its duties to agents or subcontractors so long as the related
agreements or arrangements with such agents or subcontractors are consistent
with the provisions of this Section 3.1(c).
Any sub-servicing agreement entered into by the Servicer or
the Special Servicer, shall provide that it may be assumed or terminated by
the Trustee if the Trustee or a successor Servicer or Special Servicer has
assumed the duties of the Servicer or the Special Servicer, as applicable,
without cost or obligation to the assuming or terminating party or the Trust
Fund, upon the assumption by the Trustee or a successor Servicer or Special
Servicer of the obligations of the Servicer or the Special Servicer, as
applicable, pursuant to Section 7.2.
Any sub-servicing agreement, and any other transactions or
services relating to the Mortgage Loans involving a sub-servicer, shall be
deemed to be between the Servicer or the Special Servicer, as applicable, and
such sub-servicer alone, and the Trustee and the Certificateholders shall not
be deemed parties thereto and shall have no claims, rights, obligations,
duties or liabilities with respect to the sub-servicer, including the
Depositor acting in such capacity, except as set forth in Section 3.1(d).
(e) If the Trustee or any successor Servicer or Special
Servicer assumes the obligations of the Servicer or the Special Servicer, as
applicable, in accordance with Section 7.2, the Trustee or such successor
Servicer or Special Servicer, to the extent necessary to permit the Trustee or
such successor Servicer or Special Servicer to carry out the provisions of
Section 7.2, shall, without act or deed on the part of the Trustee or such
successor Servicer or Special Servicer, succeed to all of the rights and
obligations of the Servicer or Special Servicer under any sub-servicing
agreement entered into by the Servicer or Special Servicer pursuant to Section
3.1(c), subject to the right of termination by the Trustee set forth in
Section 3.1(c). In such event, the Trustee or such successor Servicer or
Special Servicer shall be deemed to have assumed all of the Servicer's or
Special Servicer's interest therein (but not any liabilities or obligations in
respect of acts or omissions of the Servicer or Special Servicer prior to such
deemed assumption) and to have replaced the Servicer or the Special Servicer,
as applicable, as a party to such sub-servicing agreement to the same extent
as if such sub-servicing agreement had been assigned to the Trustee or such
successor Servicer, except that the Servicer or the Special Servicer shall not
thereby be relieved of any liability or obligations under such
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sub-servicing agreement that accrued prior to the assumption of duties hereunder
by the Trustee or such successor Servicer or Special Servicer.
In the event that the Trustee or any successor Servicer or
Special Servicer assumes the servicing obligations of the Servicer or the
Special Servicer, as the case may be, upon request of the Trustee or such
successor Servicer or Special Servicer, as the case may be, the Servicer or
Special Servicer shall, at its own expense, deliver to the Trustee or such
successor Servicer or Special Servicer (as the case may be) all documents and
records relating to any sub-servicing agreement and the Mortgage Loans then
being serviced thereunder and an accounting of amounts collected and held by
it, if any, and the Servicer will otherwise use its best efforts to effect the
orderly and efficient transfer of any sub-servicing agreement to the Trustee
or such successor Servicer.
(f) Notwithstanding anything herein to the contrary, the
Servicer shall service the ___________ Interest in accordance with the
__________ Agreement, and in connection therewith, the Servicer shall (i)
receive the payments due and payable with respect to the ___________ Interest
and deposit such payments into the Collection Account in accordance with
Section 3.5 of this Agreement, (ii) enforce _________ the Agreement and all
other documentation with respect thereto in accordance with the ____________
Agreement and this Agreement and (iii) take such other actions with respect
thereto as shall be required in accordance with the Servicing Standard and
this Agreement (including, without limitation, making Advances with respect to
the Trust Fund's participation interest in the ____________ Loan as evidenced
by the _____________ Certificate) to the extent and in the manner provided
herein with respect to the making of Advances for other Mortgage Loans.
Pursuant to the ___________ Agreement, the Servicer shall pay as an expense of
the Trust Fund (i) to the special servicer under the Prior Pooling and
Servicing Agreement a proportionate share of any special servicing fee that
becomes due with respect to the _________ Loan if and when the
________________ Loan becomes a specially serviced mortgage loan under the
Prior Pooling and Servicing Agreement and (ii) to the servicer under the Prior
Pooling and Servicing Agreement a proportionate share of (x) the amount of any
property advances made under the Prior Pooling and Servicing Agreement deemed
to be nonrecoverable advances thereunder and (y) the advance interest amount
which has accrued on any reimbursed property advances incurred with respect to
the ___________ Loan under the Prior Pooling and Servicing Agreement.
SECTION 3.2. Liability of the Servicer.
Notwithstanding any sub-servicing agreement, any of the
provisions of this Agreement relating to agreements or arrangements between
the Servicer or Special Servicer and any Person acting as sub-servicer (or its
agents or subcontractors) or any reference to actions taken through any Person
acting as sub-servicer or otherwise, the Servicer or the Special Servicer, as
applicable, shall remain obligated and primarily liable to the Trustee and
Certificateholders for the servicing and administering of the Mortgage Loans
in accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue of such sub-servicing agreements or
arrangements or by virtue of indemnification from the Depositor or any Person
acting as sub-servicer (or its agents or subcontractors) to the same
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extent and under the same terms and conditions as if the Servicer or Special
Servicer, as applicable, were servicing and administering the Mortgage Loans
alone. The Servicer or the Special Servicer, as applicable, shall be entitled
to enter into an agreement with any sub-servicer providing for indemnification
of the Servicer or the Special Servicer, as applicable, by such sub-servicer,
and nothing contained in this Agreement shall be deemed to limit or modify
such indemnification, but no such agreement for indemnification shall be
deemed to limit or modify this Agreement.
SECTION 3.3. Collection of Certain Mortgage Loan Payments.
The Servicer and the Special Servicer shall make reasonable
efforts to collect all payments called for under the terms and provisions of
the Mortgage Loans when the same shall be due and payable, and shall follow
such collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for other third-party portfolios,
including using its best efforts in accordance with the Servicing Standard to
collect income statements and rent rolls from the related Borrowers as
required by the related Mortgage Loan Documents and providing (in the case of
the Servicer only) reasonable advance notice to such Borrowers of Balloon
Payments due with respect to such Mortgage Loans. Consistent with the
foregoing, the Servicer or the Special Servicer, as applicable, may in its
discretion waive any late payment charge or penalty fees in connection with
any delinquent Monthly Payment or Balloon Payment with respect to any Mortgage
Loan.
SECTION 3.4. Collection of Taxes, Assessments and Similar
Items.
(a) With respect to each Mortgage Loan (other than REO
Mortgage Loans), the Servicer shall maintain accurate records with respect to
each related Mortgaged Property reflecting the status of taxes, assessments
and other similar items that are or may become a lien on such related
Mortgaged Property, the status of insurance premiums payable with respect
thereto and the amounts of Escrow Payments, if any, required in respect
thereof. From time to time, the Servicer shall (i) obtain all bills for the
payment of such items (including renewal premiums), and (ii) effect payment of
all such bills with respect to each such Mortgaged Property prior to the
applicable penalty or termination date, in each case employing for such
purpose Escrow Payments as allowed under the terms of such Mortgage Loan. If a
Borrower fails to make any such Escrow Payment on a timely basis or
collections from such Borrower are insufficient to pay any such item before
the applicable penalty or termination date, the Servicer shall (in accordance
with Section 3.8 with respect to the payment of insurance premiums) advance
the amount necessary to effect payment of any such item, unless the Servicer,
in its good faith business judgment, determines that such Advance would be a
Nonrecoverable Advance. With respect to any Mortgage Loan as to which the
related Borrower is not required to make Escrow Payments, if such Borrower
fails to effect payment of any such bill, then, the Servicer shall (in
accordance with Section 3.8 with respect to the payment of insurance premiums)
advance the amount necessary to effect payment of any such bill on or before
the applicable penalty or termination date unless, with respect to the payment
of taxes and assessments, (x) the Servicer reasonably anticipates that such
bill will be paid by the Borrower by the close of business on or before the
penalty date, but in any event the Servicer shall make such advance (subject
to clause (y) below) within __ days after such date or within ____
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Business Days after the Servicer has received confirmation that such item has
not been paid, whichever is earlier, or (y) the Servicer determines, in its
good faith business judgment, that such Property Advance would be a
Nonrecoverable Advance. The Servicer shall be entitled to reimbursement of
Property Advances that it makes pursuant to the preceding sentence, with
interest thereon at the Advance Rate, from amounts received on or in respect
of the Mortgage Loan respecting which such Property Advance was made or if
such Property Advance has become a Nonrecoverable Advance, to the extent
permitted by Section 3.6 of this Agreement. No costs incurred by the Servicer
in effecting the payment of taxes and assessments on the Mortgaged Properties
shall, for the purpose of calculating distributions to Certificateholders, be
added to the amount owing under the related Mortgage Loans, notwithstanding
that the terms of such Mortgage Loans so permit.
(b) The Servicer shall segregate and hold all funds
collected and received pursuant to any Mortgage Loan constituting Escrow
Payments separate and apart from any of its own funds and general assets and
shall establish and maintain one or more segregated custodial accounts (each,
an "Escrow Account") into which all Escrow Payments shall be deposited within
______ Business Day after receipt. The Servicer shall also deposit into each
Escrow Account any amounts representing losses on Permitted Investments in
which amounts on deposit in such Escrow Account have been invested pursuant to
Section 3.7(b) and any Insurance Proceeds, Condemnation Proceeds or
Liquidation Proceeds which are required to be applied to the restoration or
repair of the related Mortgaged Property pursuant to the related Mortgage
Loan. Escrow Accounts shall be Eligible Accounts and shall be entitled, " , as
Servicer, in trust for , as Trustee in trust for Holders of Prudential
Securities Secured Financing Corporation, Commercial Mortgage Pass-Through
Certificates, Series , and Various Borrowers." Withdrawals from an Escrow
Account may be made by the Servicer only:
(i) to effect timely payments of items with respect to
which Escrow Payments are required pursuant to the
related Mortgage;
(ii) to transfer funds to the Collection Account to
reimburse the Servicer, the Trustee or the Fiscal
Agent, as applicable, for any Advance relating to
Escrow Payments, but only from amounts received
with respect to the related Mortgage Loan which
represent late collections of Escrow Payments
thereunder;
(iii) for application to the restoration or repair of the
related Mortgaged Property in accordance with the
related Mortgage Loan and the Servicing Standard;
(iv) to clear and terminate such Escrow Account upon the
termination of this Agreement;
(v) to pay from time to time to the Servicer any
interest or investment income earned on funds
deposited in such Escrow Account pursuant to
Section 3.7(b) to the extent (a) permitted by law
and (b) not required to be paid
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to the related Borrower under the terms of the
related Mortgage Loan or by law, or to pay such
interest or income to the related Borrower if such
income is required to paid to the related Borrower
under law or by the terms of the related Mortgage
Loan;
(vi) to remit to the related Borrower the Financial and
Lease Reporting Fee as and when required pursuant
to the related Mortgage; and
(vii) to remove any funds deposited in such Escrow
Account that were not required to be deposited
therein.
SECTION 3.5. Collection Account; Distribution Account.
(a) The Servicer shall establish and maintain the Collection
Account in the Trustee's name, for the benefit of the Certificateholders and
the Trustee as the Holder of the Lower-Tier Regular Interests. The Collection
Account shall be established and maintained as an Eligible Account. The
Servicer shall deposit or cause to be deposited in the Collection Account
within ___ Business Day following receipt the following payments and
collections received or made by it on or with respect to the Mortgage Loans:
(i) all payments on account of principal on the
Mortgage Loans, including the principal component
of Unscheduled Payments on the Mortgage Loans;
(ii) all payments on account of interest and Default
Interest on the Mortgage Loans and the interest
portion of all Unscheduled Payments and all
Prepayment Premiums;
(iii) any amounts required to be deposited pursuant to
Section 3.7(b) in connection with losses realized
on Permitted Investments with respect to funds held
in the Collection Account and pursuant to Section
3.25 in connection with Prepayment Interest
Shortfalls;
(iv) (x) all Net REO Proceeds transferred from an REO
Account pursuant to Section 3.17(b) and (y) all
Condemnation Proceeds, Insurance Proceeds and Net
Liquidation Proceeds not required to be applied to
the restoration or repair of the related Mortgaged
Property;
(v) any amounts received from Borrowers which represent
recoveries of Property Protection Expenses or
Property Advances made pursuant to Section 3.4;
(vi) any other amounts required by the provisions of
this Agreement to be deposited into the Collection
Account by the Servicer or the Special Servicer,
including, without limitation, proceeds of any
purchase or repurchase of a Mortgage Loan pursuant
to Section 2.3(d) or (e), Section 3.18 or Section
9.1 hereof; and
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(vii) all amounts collected in respect of the ___________
Interest.
The foregoing requirements for deposits in the Collection
Account shall be exclusive, it being understood and agreed that, without
limiting the generality of the foregoing, payments in the nature of late
payment charges, late fees, Assumption Fees, loan modification fees, loan
service transaction fees, extension fees, demand fees, beneficiary statement
charges and similar fees need not be deposited in the Collection Account by
the Servicer and, to the extent permitted by applicable law, the Servicer or
the Special Servicer, as applicable, shall be entitled to retain any such
charges and fees received with respect to the Mortgage Loans. In the event
that the Servicer deposits in the Collection Account any amount not required
to be deposited therein, the Servicer may at any time withdraw such amount
from the Collection Account, any provision herein to the contrary
notwithstanding.
(b) The Trustee shall establish and maintain the
Distribution Account in the name of the Trustee, in trust for the benefit of
the Certificateholders. The Distribution Account shall be established and
maintained as an Eligible Account.
(c) Funds in the Collection Account and the Distribution
Account may be invested in Permitted Investments in accordance with the
provisions of Section 3.7. The Servicer shall give written notice to the
Trustee of the location and account number of the Collection Account and shall
notify the Trustee in writing prior to any subsequent change thereof.
SECTION 3.6. Permitted Withdrawals from the Collection
Account.
The Servicer may make withdrawals from the Collection
Account only as described below (the order set forth below not constituting an
order of priority for such withdrawals):
(i) to remit to the Trustee, for deposit in the
Distribution Account, the amounts required to be
deposited in the Distribution Account pursuant to
Section 4.6;
(ii) to pay or reimburse the Servicer, the Trustee or
the Fiscal Agent for Advances, the right of the
Servicer, the Trustee or the Fiscal Agent to
reimburse itself pursuant to this clause (ii) being
limited to either (x) any collections on or in
respect of the particular Mortgage Loan or REO
Property respecting which each such Advance was
made, or (y) any other amounts in the Collection
Account in the event that such Advances have been
deemed to be Nonrecoverable Advances or are not
recovered from recoveries in respect of the related
Mortgage Loan or REO Property after a Final
Recovery Determination;
(iii) to pay to the Servicer, the Trustee or the Fiscal
Agent the Advance Interest Amount;
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(iv) to pay on or before each Remittance Date to the
Servicer and the Special Servicer, as applicable,
as compensation, the unpaid Servicing Fee and
Special Servicing Fee, respectively, in respect of
the related Distribution Date (in each case,
reduced up to the amount of any Prepayment Interest
Shortfalls with respect to such Distribution Date,
in accordance with Section 3.25), to be paid, in
the case of the Servicing Fee, from interest
received on the related Mortgage Loans, and to pay
from time to time, to the Servicer any interest or
investment income earned on funds deposited in the
Collection Account, and to pay to the Servicer as
additional Servicing Compensation any Prepayment
Interest Surplus received in the preceding
Collection Period and to pay to the Servicer or the
Special Servicer, as applicable, any other amounts
constituting Servicing Compensation;
(v) to pay on or before each Distribution Date to the
Depositor, the Mortgage Loan Seller,
____________________ or the purchaser of any
Specially Serviced Mortgage Loan or REO Property,
as the case may be, with respect to each Mortgage
Loan or REO Property that has previously been
purchased or repurchased by it pursuant to Section
2.3(d), 2.3(e), Section 3.18 or Section 9.1, all
amounts received thereon during the related
Collection Period and subsequent to the date as of
which the amount required to effect such purchase
or repurchase was determined;
(vi) to the extent not reimbursed or paid pursuant to
any other clause of this Section 3.6, to reimburse
or pay the Servicer, the Special Servicer, the
Trustee, the Depositor and/or the Fiscal Agent for
unpaid items incurred by or on behalf of such
Person pursuant to the second sentence of Section
3.1(f), the second sentence of Section 3.7(c),
Section 3.8(a), Section 3.10, Section 3.12(d),
Section 3.17(a), (b) and (c), Section 3.18(a), 6.3,
7.4, 8.5(d), 9.1(d) or Section 10.7, or any other
provision of this Agreement pursuant to which such
Person is entitled to reimbursement or payment from
the Trust Fund, in each case only to the extent
reimbursable under such Section, it being
acknowledged that this clause (vi) shall not be
deemed to modify the substance of any such Section,
including the provisions of such Section that set
forth the extent to which one of the foregoing
Persons is or is not entitled to payment or
reimbursement;
(vii) to deposit in one or more separate, non-interest
bearing accounts any amount reasonably determined
by the Trustee to be necessary to pay any
applicable federal, state or local taxes imposed on
the Lower-Tier REMIC under the circumstances and to
the extent described in Section 4.5;
(viii) to withdraw any amount deposited into the
Collection Account that was not required to be
deposited therein; and
(ix) to clear and terminate the Collection Account
pursuant to Section 9.1.
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The Servicer shall keep and maintain separate accounting, on
a Mortgage Loan-by-Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Collection Account pursuant to subclauses (ii) - (viii)
above.
The Servicer shall pay to the Trustee or the Special
Servicer from the Collection Account (to the extent permitted by clauses
(i)-(viii) above) amounts permitted to be paid to the Trustee or the Special
Servicer therefrom, promptly upon receipt of a certificate of a Responsible
Officer of the Trustee or a Servicing Officer of the Special Servicer, as
applicable, describing the item and amount to which the Trustee or the Special
Servicer is entitled. The Servicer may rely conclusively on any such
certificate and shall have no duty to recalculate the amounts stated therein.
The Trustee, the Special Servicer and the Servicer shall in
all cases have a right prior to the Certificateholders to any funds on deposit
in the Collection Account from time to time for the reimbursement or payment
of Servicing Compensation, Advances (subject to the limitation set forth in
Section 3.6(ii)) and their respective expenses (including Advance Interest
Amounts) hereunder to the extent such expenses are to be reimbursed or paid
from amounts on deposit in the Collection Account pursuant to this Agreement.
SECTION 3.7. Investment of Funds in the Collection Account,
the Distribution Account and the Reserve
Accounts.
(a) The Servicer (or with respect to any REO Account, the
Special Servicer) may direct (or, with respect to the Distribution Account,
cause the Trustee to direct) any depository institution maintaining the
Collection Account, the Distribution Account, any REO Account or (subject to
applicable laws and the related Mortgage Loan Documents) any Reserve Accounts
(each, for purposes of this Section 3.7, an "Investment Account") to invest
the funds in such Investment Account in one or more Permitted Investments that
bear interest or are sold at a discount, and that mature, unless payable on
demand, no later than the Business Day preceding the date on which such funds
are requited to be withdrawn from such Investment Account pursuant to this
Agreement; provided, however, that all investments in the Distribution
Account, including those payable on demand, shall mature no later than the
Business Day prior to the next Distribution Date. Any direction by the
Servicer (or with respect to an REO Account, the Special Servicer) to invest
funds on deposit in an Investment Account shall be in writing and shall
certify that the requested investment is a Permitted Investment which matures
at or prior to the time required hereby or is payable on demand. In the case
of any Reserve Account, the Servicer shall act upon the written request of the
related Borrower or Manager to the extent the Servicer is required to do so
under the terms of the related Mortgage Loan, provided that in the absence of
appropriate written instructions from such Borrower or Manager meeting the
requirements of this Section 3.7, the Servicer shall have no obligation to,
but will be entitled to, direct the investment of funds in such Reserve
Accounts. All such Permitted Investments shall be held to maturity, unless
payable on demand. Any investment of funds in an Investment Account shall be
made in the name of the Trustee (in its capacity as such) or in the name of a
nominee of the Trustee. The Trustee shall have sole control (except with
respect to investment direction which shall be in the sole control of the
Servicer or the Special Servicer, as applicable, as an independent contractor
to the Trust Fund) over each such investment and
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any certificate or other instrument evidencing any such investment shall be
delivered directly to the Trustee or its agent (which shall initially be the
Servicer), together with any document of transfer, if any, necessary to
transfer title to such investment to the Trustee or its nominee. The Trustee
shall have no responsibility or liability with respect to the investment
directions of the Servicer or the Special Servicer or any losses resulting
therefrom, whether from Permitted Investments or otherwise. In the event
amounts on deposit in an Investment Account are at any time invested in a
Permitted Investment payable on demand, the Servicer or the Special Servicer,
as applicable, shall:
(x) consistent with any notice required to be
given thereunder, demand that payment
thereon be made on the _____ day such
Permitted Investment may otherwise mature
hereunder in an amount equal to the lesser
of (1) all amounts then payable thereunder
and (2) the amount required to be
withdrawn on such date; and
(y) demand payment of all amounts due
thereunder promptly upon determination by
the Servicer or the Special Servicer, as
applicable, that such Permitted Investment
would not constitute a Permitted
Investment in respect of funds thereafter
on deposit in the related Investment
Account.
(b) All income and gain realized from investment of funds
deposited in the Collection Account, the Distribution Account and any Reserve
Account as to which the related Borrower is not entitled to interest thereon
shall be for the benefit of the Servicer (other than income or gain realized
from investment of funds on deposit in the Distribution Account made by the
Trustee on the Business Day prior to any Distribution Date that matures on
such Distribution Date) and all income and gain realized from investment of
funds deposited in any REO Account shall be for the benefit of the Special
Servicer and, other than with respect to the Distribution Account, may be
withdrawn by the Servicer or the Special Servicer, as applicable, from time to
time in accordance with Section 3.6 and Section 3.17(b), as applicable. The
Servicer may request that the Trustee withdraw and remit to the Servicer all
amounts due to it with respect to the Distribution Account pursuant to the
preceding sentence. The Servicer shall deposit from its own funds in the
Collection Account and the Distribution Account, as the case may be, the
amount of any loss incurred in respect of any such Permitted Investment
immediately upon realization of such loss and the Special Servicer shall
deposit from its own funds in any REO Account the amount of any loss incurred
in respect of any such Permitted Investment immediately upon realization of
such loss. The Servicer shall also deposit into each Reserve Account any
amounts representing losses on Permitted Investments in which such Reserve
Accounts have been invested, except to the extent that amounts are invested
for the benefit of the Borrower under applicable law or the terms of the
related Mortgage Loan. The income and gain realized from investment of funds
deposited in any Reserve Account shall be paid from time to time to the
related Borrower to the extent required under the Mortgage Loan or applicable
law.
(c) Except as otherwise expressly provided in this
Agreement, if any default occurs in the making of a payment due under any
Permitted Investment, or if a default occurs
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in any other performance required under any Permitted Investment, the Trustee
may, and upon the request of Holders of Certificates representing at least __%
of the aggregate Voting Rights of any Class shall, take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings. In the event the Trustee takes any
such action, the Trust Fund shall pay or reimburse the Trustee for all
reasonable out-of-pocket expenses, disbursements and advances incurred or made
by the Trustee in connection therewith. In the event that the Trustee does not
take any such action, the Servicer may take such action at its own cost and
expense.
SECTION 3.8. Maintenance of Insurance Policies and Errors
and Omissions and Fidelity Coverage.
(a) The Servicer on behalf of the Trustee, as mortgagee,
shall use its best efforts in accordance with the Servicing Standard to cause
the related Borrower to maintain for each Mortgage Loan (other than REO
Mortgage Loans), and if the Borrower does not so maintain, shall itself
maintain (subject to the provisions of this Agreement concerning
Nonrecoverable Advances) to the extent the Trustee as mortgagee has an
insurable interest and to the extent available at commercially reasonable
rates, (A) fire and hazard insurance with extended coverage on the related
Mortgaged Property in an amount which is at least equal to the lesser of (i)
___________ percent (___%) of the then "full replacement cost" of the
improvements and equipment (excluding foundations, footings and excavation
costs), without deduction for physical depreciation, and (ii) the outstanding
principal balance of the related Mortgage Loan or such other amount as is
necessary to prevent any reduction in such policy by reason of the application
of co-insurance and to prevent the Trustee thereunder from being deemed to be
a co-insurer, (B) insurance providing coverage against ___ months of rent
interruptions and (C) such other insurance (including public liability
insurance) as provided in the related Mortgage Loan. The Special Servicer
shall maintain, to the extent available at commercially reasonable rates, fire
and hazard insurance from a Qualified Insurer with extended coverage on each
REO Property in an amount which is at least equal to ___________ percent
(___%) of the then "full replacement cost" of the improvements and equipment
(excluding foundations, footings and excavation costs), without deduction for
physical depreciation. The Special Servicer shall maintain (subject to the
provisions of this Agreement regarding Nonrecoverable Advances), to the extent
available at commercially reasonable rates, with respect to each REO Property
(A) public liability insurance providing such coverage against such risks as
the Servicer or the Special Servicer, as applicable, determines, consistent
with the related Mortgage and the Servicing Standard, to be in the best
interests of the Trust Fund, and shall cause to be maintained with respect to
each REO Property (B) insurance providing coverage against ___ months of rent
interruptions, and (C) such other insurance as provided in the related
Mortgage Loan to the extent available at commercially reasonable rates and in
the case of each of (A), (B), and (C) from a Qualified Insurer. In the case of
any insurance otherwise required to be maintained pursuant to this section
that is not being so maintained because the Servicer or the Special Servicer,
as applicable, has deemed that it is not available at commercially reasonable
rates, the Servicer or the Special Servicer, as applicable, shall deliver an
Officer's Certificate to the Trustee detailing the steps that the Servicer or
the Special Servicer, as applicable, took in seeking such insurance and the
factors which led to its determination that such insurance is not so
available. Any amounts collected by the Servicer or the Special
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Servicer, as applicable, under any such policies (other than amounts to be
applied to the restoration or repair of the related Mortgaged Property or
amounts to be released to the Borrower in accordance with the terms of the
related Mortgage) shall be deposited into the Collection Account pursuant to
Section 3.5, subject to withdrawal pursuant to Section 3.6. Any cost incurred
by the Servicer in maintaining any such insurance shall not, for the purpose
of calculating distributions to Certificateholders, be added to the unpaid
principal balance of the related Mortgage Loan, notwithstanding that the terms
of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance other than flood insurance is to be
required of any Borrower or to be maintained by the Servicer other than
pursuant to the terms of the related Mortgage Loan Documents and pursuant to
such applicable laws and regulations as shall at any time be in force and as
shall require such additional insurance; provided, however, that each of the
Servicer and the Special Servicer may maintain earthquake insurance. If the
Mortgaged Property is located in a federally designated special flood hazard
area, the Servicer will use its best efforts in accordance with the Servicing
Standard to cause the related Borrower to maintain or will itself obtain
(subject to the provisions of this Agreement concerning Nonrecoverable
Advances) flood insurance in respect thereof to the extent available at
commercially reasonable rates. Such flood insurance shall be in an amount
equal to the lesser of (i) the unpaid principal balance of the related
Mortgage Loan and (ii) the maximum amount of such insurance required by the
terms of the related Mortgage and as is available for the related property
under the national flood insurance program (assuming that the area in which
such property is located is participating in such program). If an REO Property
is located in a federally designated special flood hazard area, the Special
Servicer will obtain (subject to the provisions of this Agreement concerning
Nonrecoverable Advances) flood insurance in respect thereof providing
substantially the same coverage as described in the preceding sentences. If at
any time during the term of this Agreement a recovery under a flood or fire
and hazard insurance policy in respect of an REO Property is not available but
would have been available if such insurance were maintained thereon in
accordance with the standards applied to Mortgaged Properties described
herein, the Special Servicer shall (subject to the provisions of this
Agreement concerning Nonrecoverable Advances) either (i) immediately deposit
into the Collection Account from its own funds the amount that would have been
recovered or (ii) apply to the restoration and repair of the property from its
own funds the amount that would have been recovered, if such application would
be consistent with the servicing standard set forth in Section 3.1(a);
provided, however, that the Special Servicer shall not be responsible for any
shortfall in insurance proceeds resulting from an insurer's refusal or
inability to pay a claim. Costs to the Servicer of maintaining insurance
policies pursuant to this Section 3.8 shall be paid by the Servicer as a
Property Advance and shall be reimbursable to the Servicer with interest at
the Advance Rate, which reimbursement may be effected under Section 3.6(vi);
and costs to the Special Servicer of maintaining insurance policies pursuant
to this Section 3.8 shall be paid and reimbursed in accordance with Section
3.17(b).
The Servicer and the Special Servicer agree to prepare and
present, on behalf of itself, the Trustee and the Certificateholders, claims
under each related insurance policy maintained pursuant to this Section 3.8(a)
in a timely fashion in accordance with the terms of such policy and to take
such reasonable steps as are necessary to receive payment or to permit
recovery thereunder.
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The Servicer (or with respect to any REO Property, the
Special Servicer) shall require that all insurance policies required hereunder
shall name the Trustee or the Servicer (or with respect to any REO Property,
the Special Servicer), on behalf of the Trustee as the mortgagee, as loss
payee and that all such insurance policies require that ___ days' notice be
given to the Servicer before termination to the extent required by the related
Mortgage Loan Documents.
(b) (I) If the Servicer or Special Servicer, as applicable,
obtains and maintains a blanket insurance policy with a Qualified Insurer at
its own expense insuring against fire and hazard losses, ___-month rent
interruptions or other required insurance on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations concerning the
maintenance of such insurance coverage set forth in Section 3.8(a), it being
understood and agreed that such policy may contain a deductible clause, in
which case the Servicer or Special Servicer, as applicable, shall, in the
event that (i) there shall not have been maintained on one or more of the
related Mortgaged Properties a policy otherwise complying with the provisions
of Section 3.8(a), and (ii) there shall have been one or more losses which
would have been covered by such a policy had it been maintained, immediately
deposit into the Collection Account from its own funds the amount not
otherwise payable under the blanket policy because of such deductible clause
to the extent that any such deductible exceeds the deductible limitation that
pertained to the related Mortgage Loan, or, in the absence of such deductible
limitation, the deductible limitation which is consistent with the Servicing
Standard. In connection with its activities as Servicer or Special Servicer
hereunder, as applicable, the Servicer and the Special Servicer each agrees to
prepare and present, on behalf of itself, the Trustee and Certificateholders,
claims under any such blanket policy which it maintains in a timely fashion in
accordance with the terms of such policy and to take such reasonable steps as
are necessary to receive payment or permit recovery thereunder.
(II) If the Servicer or the Special Servicer, as applicable,
causes any Mortgaged Property or REO Property to be covered by a master force
placed insurance policy, which policy is issued by a Qualified Insurer and
provides no less coverage in scope and amount for such Mortgaged Property or
REO Property than the insurance required to be maintained pursuant to Section
3.8(a), the Servicer or Special Servicer shall conclusively be deemed to have
satisfied its obligations to maintain insurance pursuant to Section 3.8(a).
Such policy may contain a deductible clause, in which case the Servicer or
Special Servicer, as applicable, shall, in the event that (i) there shall not
have been maintained on the related Mortgaged Property or REO Property a
policy otherwise complying with the provisions of Section 3.8(a), and (ii)
there shall have been one or more losses which would have been covered by such
a policy had it been maintained, immediately deposit into the Collection
Account from its own funds the amount not otherwise payable under such policy
because of such deductible to the extent that any such deductible exceeds the
deductible limitation that pertained to the related Mortgage Loan, or, in the
absence of any such deductible limitation, the deductible limitation which is
consistent with the Servicing Standard.
(c) Each of the Servicer and the Special Servicer shall
maintain a fidelity bond in the form and amount that would meet the servicing
requirements of prudent institutional commercial mortgage loan servicers. The
Servicer or the Special Servicer, as applicable, shall
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be deemed to have complied with this provision if one of its respective
Affiliates has such fidelity bond coverage and, by the terms of such fidelity
bond, the coverage afforded thereunder extends to the Servicer or the Special
Servicer, as applicable. In addition, each of the Servicer and the Special
Servicer shall keep in force during the term of this Agreement a policy or
policies of insurance covering loss occasioned by the errors and omissions of
its officers and employees in connection with its obligations to service the
Mortgage Loans hereunder in the form and amount that would meet the servicing
requirements of prudent institutional commercial mortgage loan servicers. Each
of the Servicer and the Special Servicer shall cause each and every
sub-servicer for it to maintain, or cause to be maintained by any agent or
contractor servicing any Mortgage Loan on behalf of such subservicer, a
fidelity bond and an errors and omissions insurance policy which satisfy the
requirements for the fidelity bond and the errors and omissions policy to be
maintained by the Servicer or the Special Servicer pursuant to this Section
3.8(c). All fidelity bonds and policies of errors and omissions insurance
obtained under this Section 3.8(c) shall be issued by a Qualified Insurer.
SECTION 3.9. Enforcement of Due-On-Sale Clauses; Assumption
Agreements.
(a) If any Mortgage Loan contains a provision in the nature
of a "due-on-sale" clause, which, by its terms:
(i) provides that such Mortgage Loan shall (or may at
the related mortgagee's option) become due and
payable upon the sale or other transfer of an
interest in the related Mortgaged Property, or
(ii) provides that such Mortgage Loan may not be assumed
without the consent of the related mortgagee in
connection with any such sale or other transfer,
then, for so long as such Mortgage Loan is included in the Trust Fund, the
Servicer or the Special Servicer, as applicable, on behalf of the Trust Fund,
shall enforce such provision to the extent permitted under the terms of such
Mortgage Loan, applicable law and governmental regulations, unless such
provision is not enforceable under applicable law or enforcement thereof would
result in a loss of insurance coverage under any related insurance policy or
such enforcement is reasonably likely to result in meritorious legal action by
the related Borrower or except to the extent that the Servicer or the Special
Servicer, as applicable, acting in accordance with the Servicing Standard,
determines that such enforcement would not be in the best interests of the
Trust Fund. Subject to the foregoing, the Servicer or the Special Servicer, as
applicable, is authorized to take or enter into an assumption agreement from
or with the Person to whom such Mortgaged Property has been or is about to be
conveyed, or to release the original related Borrower from liability upon such
Mortgage Loan and substitute the new Borrower as obligor thereon. To the
extent permitted by law, the Servicer or the Special Servicer, as applicable,
shall enter into an assumption or substitution agreement only if the credit
status of the prospective new Borrower is in compliance with the Servicer's or
the Special Servicer's, as applicable, regular commercial mortgage origination
or servicing standards and criteria and the terms of the related Mortgage. The
Servicer or the Special Servicer, as applicable, shall notify
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the Trustee that any such assumption or substitution agreement has been
completed by forwarding to the Trustee the original of such agreement, which
document shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. In connection
with any such assumption or substitution agreement, the Mortgage Rate,
principal amount and other material payment terms (including any
cross-collateralization and cross-default provisions) of such Mortgage Loan
pursuant to the related Note and Mortgage shall not be changed, other than in
connection with a default or reasonably foreseeable default with respect to
the Mortgage Loan. Assumption Fees collected by the Servicer or the Special
Servicer, as applicable, for entering into an assumption or substitution
agreement will be retained by the Servicer or the Special Servicer, as
applicable, as additional servicing compensation. Notwithstanding the
foregoing, the Servicer or Special Servicer may consent to the assumption of a
Mortgage Loan by a prospective new Borrower in a bankruptcy proceeding
involving the related Mortgaged Property.
(b) If any Mortgage Loan contains a provision in the nature
of a "due-on-encumbrance" clause, which, by its terms:
(i) provides that such Mortgage Loan shall (or may at
the related mortgagee's option) become due and
payable upon the creation of any lien or other
encumbrance on such Mortgaged Property, or
(ii) requires the consent of the related mortgagee to
the creation of any such lien or other encumbrance
on such Mortgaged Property,
then, for so long as such Mortgage Loan is included in the Trust Fund, the
Servicer or the Special Servicer, as applicable, on behalf of the Trust Fund,
shall enforce such provision and in connection therewith shall (x) accelerate
the payments due on such Mortgage Loan, or (y) withhold its consent to the
creation of any such lien or other encumbrance, as applicable, except, in each
case, to the extent that the Servicer or the Special Servicer, as applicable,
acting in accordance with the Servicing Standard, determines that such
enforcement would not be in the best interests of the Trust Fund and receives
written confirmation from ____________ that forbearance to enforce such
provision shall not result, in and of itself, in a downgrading, withdrawal or
qualification of the rating then assigned by to any Class of Certificates.
Notwithstanding the foregoing, the Servicer or the Special Servicer, as
applicable, may forbear from enforcing any due-on-encumbrance provision in
connection with any junior or senior lien on the Mortgaged Property imposed in
connection with any bankruptcy proceeding involving the Mortgaged Property.
(c) Nothing in this Section 3.9 shall constitute a waiver of
the Trustee's right, as the mortgagee of record, to receive notice of any
assumption of a Mortgage Loan, any sale or other transfer of the related
Mortgaged Property or the creation of any lien or other encumbrance with
respect to such Mortgaged Property.
(d) In connection with the taking of, or the failure to
take, any action pursuant to this Section 3.9, the Servicer or the Special
Servicer, as applicable, shall not agree to modify,
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waive or amend, and no assumption or substitution agreement entered into
pursuant to Section 3.9(a) shall contain any terms that are different from,
any term of any Mortgage Loan or the related Note or Mortgage.
SECTION 3.10. Realization Upon Mortgage Loans.
(a) With respect to any Specially Serviced Mortgage Loan,
the Special Servicer shall determine, in accordance with the Servicing
Standard, whether to grant a modification, waiver or amendment of the terms of
such Specially Serviced Mortgage Loan, commence foreclosure proceedings or
attempt to sell such Specially Serviced Mortgage Loan with reference to which
course of action is reasonably likely to produce a greater recovery on a
present value basis with respect to such Specially Serviced Mortgage Loan.
Contemporaneously with the earliest of (i) the effective date of any
modification, amendment, waiver or consent to a change of the stated maturity,
Mortgage Rate, principal balance or amortization terms of any Specially
Serviced Mortgage Loan, or any other term of a Mortgage Loan to the extent
such modification, amendment, waiver or consent would constitute a
"significant" modification under Section 1001 of the Code, including proposed
Treasury regulations thereunder, as to which Mortgage Loan a default has
occurred or is reasonably foreseeable, (ii) ___ days after the occurrence of
any uncured payment delinquency, (iii) the date ____ days after a receiver is
appointed in respect of a Mortgaged Property, or (iv) the date a Mortgaged
Property becomes an REO Property, the Special Servicer shall obtain an
appraisal of the Mortgaged Property securing any Mortgage Loan referred to in
clause (i) or (ii) or such Mortgaged Property or REO Property, as the case may
be, from an independent appraiser who is a member of the American Institute of
Real Estate Appraisers (an "Updated Appraisal"), which appraisal shall be
conducted in accordance with MAI standards.
Following a default by a Borrower in the payment of a
Balloon Payment, the Special Servicer may grant successive extensions of up to
___ months each of the related Specially Serviced Mortgage Loan; provided that
the Special Servicer shall not grant any such successive extension if, during
the previous ___-month period (or the period since the beginning of the first
such extension, if shorter), such Borrower was __ days or more delinquent in
the payment of any principal or interest required to be paid in any month; and
provided further that if any extension is requested after the third successive
extension has been granted, such further extension shall only be granted with
the consent of the Extension Advisor in accordance with Section 3.26. The
Special Servicer shall consider, among all relevant factors, any appraisal
obtained in accordance with the preceding paragraph in determining whether to
grant any such extension. The Special Servicer shall not grant any extension
that permits such Borrower to make payments of interest only for a period, in
the aggregate, of greater than ___ months.
(b) In connection with any foreclosure or other acquisition,
the Servicer shall, at the direction of the Special Servicer, pay the costs
and expenses in any such proceedings as an Advance unless the Servicer
determines, in its good faith judgment, that such Advance would constitute a
Nonrecoverable Advance. The Servicer shall be entitled to reimbursement of
Advances (with interest at the Advance Rate) made pursuant to the preceding
sentence to the extent permitted by Section 3.6(ii) (or Section 3.6(iii), in
the case of interest at the Advance Rate).
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If the Special Servicer elects to proceed with a
non-judicial foreclosure in accordance with the laws of the state where the
related Mortgaged Property is located, the Special Servicer shall not be
required to pursue a deficiency judgment against the related Borrower or any
other liable party if the laws of such state do not permit such a deficiency
judgment after a non-judicial foreclosure or if the Special Servicer
determines, in its best judgment, that the likely recovery if a deficiency
judgment is obtained will not be sufficient to warrant the cost, time, expense
and/or exposure of pursuing such a deficiency judgment and such determination
is evidenced by an Officer's Certificate delivered to the Trustee.
In the event that title to any Mortgaged Property is
acquired in foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale shall be issued to the Trustee, or to its nominee (which
shall not include the Servicer) or a separate trustee or co-trustee on behalf
of the Trustee as holder of the Lower-Tier Regular Interests and
Certificateholders. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, such Mortgage Loan shall (except
for purposes of Section 9.1) be considered to be a Mortgage Loan held in the
Trust Fund until such time as the related REO Property shall be sold by the
Trust Fund and the Scheduled Principal Balance of each REO Mortgage Loan shall
be reduced by any Net REO Proceeds allocated to principal. Consistent with the
foregoing, for purposes of all calculations hereunder, so long as such
Mortgage Loan shall be considered to be an outstanding Mortgage Loan:
(i) it shall be assumed that, notwithstanding that the
indebtedness evidenced by the related Note shall
have been discharged, such Note and, for purposes
of determining the Scheduled Principal Balance
thereof, the related amortization schedule in
effect at the time of any such acquisition of
title, remain in effect; and
(ii) Net REO Proceeds received in any month shall be
applied to amounts that would have been payable
under the related Note in accordance with the terms
of such Note. In the absence of such terms, Net REO
Proceeds shall be deemed to have been received
first in payment of the accrued interest that
remained unpaid on the date that the related REO
Property was acquired by the Trust Fund; in
respect of the delinquent principal installments
that remained unpaid on such date; and thereafter,
Net REO Proceeds received in any month shall be
applied to the payment of installments of principal
and accrued interest on such Mortgage Loan deemed
to be due and payable in accordance with the terms
of such Note and such amortization schedule. If
such Net REO Proceeds exceed the Monthly Payment
then payable, the excess shall be treated as a
Principal Prepayment received in respect of such
Mortgage Loan.
(c) Notwithstanding any provision to the contrary, the
Special Servicer shall not acquire for the benefit of the Trust Fund any
personal property pursuant to this Section 3.10 unless either:
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(i) such personal property is incident to real property
(within the meaning of Section 856(e)(1) of the
Code) so acquired by the Special Servicer for the
benefit of the Trust Fund; or
(ii) the Special Servicer shall have requested and
received an Opinion of Counsel (which opinion shall
be an expense of the Trust Fund) to the effect that
the holding of such personal property by the
Lower-Tier REMIC will not cause the imposition of a
tax on the Lower-Tier REMIC or the Upper-Tier REMIC
under the REMIC Provisions or
cause the Lower-Tier REMIC or the Upper-Tier REMIC
to fail to qualify as a REMIC at any time that any
Certificate is outstanding.
(d) Notwithstanding any provision to the contrary in this
Agreement, the Special Servicer shall not, on behalf of the Trust Fund, obtain
title to any direct or indirect partnership interest or other equity interest
in any Borrower pledged pursuant to any pledge agreement unless the Special
Servicer shall have requested and received an Opinion of Counsel (which
opinion shall be an expense of the Trust Fund) to the effect that the holding
of such partnership or other equity interest by the Trust Fund will not cause
the imposition of a tax on the Lower-Tier REMIC or the Upper-Tier REMIC under
the REMIC Provisions or cause the Lower-Tier REMIC or the Upper-Tier REMIC to
fail to qualify as a REMIC at any time that any Certificate is outstanding.
(e) Notwithstanding any provision to the contrary contained
in this Agreement, the Special Servicer shall not, on behalf of the Trust
Fund, obtain title to a Mortgaged Property as a result of or in lieu of
foreclosure or otherwise obtain title to any direct or indirect partnership
interest or other equity interest in any Borrower pledged pursuant to a pledge
agreement and thereby be the beneficial owner of a Mortgaged Property, and
shall not otherwise acquire possession of, or take any other action with
respect to, any Mortgaged Property if, as a result of any such action, the
Trustee, for the Trust Fund or the Certificateholders, would be considered to
hold title to, to be a "mortgagee-in-possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
from time to time, or any comparable law, unless the Special Servicer has
previously determined in accordance with the Servicing Standard, based on an
updated environmental assessment report prepared by an Independent Person who
regularly conducts environmental audits, that:
(A) such Mortgaged Property is in compliance with
applicable environmental laws or, if not after consultation with an
environmental consultant, that it would be in the best economic
interest of the Trust Fund to take such actions as are necessary to
bring such Mortgaged Property in compliance therewith, and
(B) there are no circumstances present at such
Mortgaged Property relating to the use, management or disposal of any
Hazardous Materials for which investigation, testing, monitoring,
containment, clean-up or remediation could be required under any
currently effective federal, state or local law or regulation, or
that, if any such Hazardous Materials are present for which such
action could be required, after
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consultation with an environmental consultant, it would be in the
best economic interest of the Trust Fund to take such actions with
respect to such Mortgaged Property.
In the event that the environmental assessment list obtained
by the Special Servicer with respect to a Mortgaged Property indicates that
such Mortgaged Property may not be in compliance with applicable environmental
laws or that Hazardous Materials may be present but does not definitively
establish such fact, the Special Servicer shall cause such further
environmental tests as the Special Servicer shall deem prudent to protect the
interests of Certificateholders to be conducted by an Independent Person who
regularly conducts such tests. Any such tests shall be deemed part of the
environmental assessment obtained by the Special Servicer for purposes of this
Section 3.10.
(f) The environmental assessment contemplated by Section
3.10(f) shall be prepared by any Independent Person who regularly conducts
environmental audits for purchasers of commercial properties located in the
same general area as the Mortgaged Property with respect to which the Special
Servicer is ordering such environmental assessment, as determined by the
Special Servicer in a manner consistent with the Servicing Standard. The
Servicer shall at the direction of the Special Servicer advance the cost of
preparation of such environmental assessments unless the Servicer determines,
in its good faith judgment, that such Advance would be a Nonrecoverable
Advance. The Servicer shall be entitled to reimbursement of Advances (with
interest at the Advance Rate) made pursuant to the preceding sentence to the
extent permitted pursuant to Section 3.6.
(g) If the Special Servicer determines pursuant to Section
3.10(f)(A) that a Mortgaged Property is not in compliance with applicable
environmental laws but that it is in the best economic interest of the Trust
Fund to take such actions as are necessary to bring such Mortgaged Property
into compliance therewith, or if the Special Servicer determines pursuant to
Section 3.10(f)(B) that the circumstances referred to therein relating to
Hazardous Materials are present but that it is in the best economic interest
of the Trust Fund to take such action with respect to the containment,
clean-up or remediation of Hazardous Materials affecting such Mortgaged
Property as is required by law or regulation, the Special Servicer shall take
such action as it deems to be in the best economic interest of the Trust Fund
(with due consideration to the avoidance of "mortgagee-in-possession," "owner"
or "operator" status, as set forth in Section 3.10(f)), but only if the
Trustee has mailed notice to the Holders of the Regular Certificates of such
proposed action, which notice shall be prepared by the Special Servicer, and
only if the Trustee does not receive, within __ days of such notification,
instructions from the Holders of at least __% of the aggregate Voting Rights
of such Classes directing the Special Servicer not to take such action. None
of the Trustee, the Servicer or the Special Servicer shall be obligated to
take any action or not take any action pursuant to this Section 3.10(h) at the
direction of the Certificateholders unless the Certificateholders agree to
indemnify the Trustee, the Servicer and the Special Servicer with respect to
such action or inaction. None of the Special Servicer, Servicer or the Trustee
shall be required to advance the cost of any such compliance, containment,
clean-up or remediation and such expense shall be an expense of the Trust
Fund.
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(h) The Special Servicer shall report to the IRS and to the
related Borrower, in the manner required by applicable law, the information
required to be reported regarding any Mortgaged Property which is abandoned or
foreclosed. The Special Servicer shall deliver a copy of any such report to
the Trustee.
(i) The costs of any appraisal obtained pursuant to this
Section 3.10 shall be paid by the Servicer as an Advance and shall be
reimbursable (with interest thereon at the Advance Rate) from the Collection
Account.
SECTION 3.11. Trustee to Cooperate; Release of Mortgage
Files.
Upon the payment in full of any Mortgage Loan, or the
receipt by the Servicer of a notification that payment in full has been
escrowed in a manner customary for such purposes, the Servicer shall
immediately notify the Trustee and the Custodian by a certification (which
certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required
to be deposited in the Collection Account pursuant to Section 3.5(a) have been
or will be so deposited) of a Servicing Officer and shall request delivery to
it of the Mortgage File. No expenses incurred in connection with any
instrument of satisfaction or deed of reconveyance shall be chargeable to the
Trust Fund.
From time to time upon request of the Servicer or the
Special Servicer, and delivery to the Trustee and the Custodian of a Request
for Release, the Trustee shall promptly cause the Custodian to release the
Mortgage File (or any portion thereof) designated in such Request for Release
to the Servicer or the Special Servicer, as applicable. Upon receipt of (a)
such Mortgage File (or portion thereof) by the Custodian from the Servicer or
the Special Servicer, as applicable, or (b) in the event of a liquidation or
conversion of the related Mortgage Loan into an REO Property, a certificate of
a Servicing Officer stating that such Mortgage Loan was liquidated and that
all amounts received or to be received in connection with such liquidation
which are required to be deposited into the Collection Account or Distribution
Account have been so deposited, or that such Mortgage Loan has become an REO
Property, the Custodian shall return the Request for Release to the Servicer
or the Special Servicer, as applicable.
Upon written certification of a Servicing Officer, the
Trustee shall execute and deliver to the Special Servicer any court pleadings,
requests for trustee's sale or other documents prepared by the Special
Servicer, its agents or attorneys, necessary to the foreclosure or trustee's
sale in respect of the Mortgaged Property or to any legal action brought to
obtain judgment against any Borrower on the related Note or Mortgage or to
obtain a deficiency judgment, or to enforce any other remedies or rights
provided by such Note or Mortgage or otherwise available at law or in equity.
Each such certification shall include a request that such pleadings or
documents be executed by the Trustee and a statement as to the reason such
documents or pleadings are required and that the execution and delivery
thereof by the Trustee will not invalidate or otherwise affect the lien of the
related Mortgage, except for the termination of such a lien upon completion of
the foreclosure or trustee's sale.
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SECTION 3.12. Servicing Compensation and Trustee Fees.
(a) As compensation for its activities hereunder, the
Servicer shall be entitled to the Servicing Fee, which shall be payable solely
from receipts on the related Mortgage Loans, and may be withheld from payments
on account of interest prior to deposit in the Collection Account, or may be
withdrawn from amounts on deposit in the Collection Account as set forth in
Section 3.6(iv). The Servicer's rights to the Servicing Fee may not be
transferred in whole or in part except in connection with the transfer of all
of the Servicer's responsibilities and obligations under this Agreement. In
addition, the Servicer shall be entitled to receive, as additional servicing
compensation, any Prepayment Interest Surplus (subject to Section 3.25) and,
to the extent permitted by applicable law and the related Notes and Mortgages,
any late payment charges, late fees, Assumption Fees, loan modification fees,
extension fees, Financial and Lease Reporting Fees (to the extent such fees
are not required to be remitted to the related Borrower pursuant to the
related Note), loan service transaction fees, beneficiary statement charges,
or similar items (but not including any Default Interest or Prepayment
Premiums), in each case to the extent received, with respect to any Mortgage
Loan that is not a Specially Serviced Mortgage Loan and not required to be
deposited or retained in the Collection Account pursuant to Section 3.5. The
Servicer shall also be entitled pursuant to, and to the extent provided in,
Section 3.7(b) to withdraw from the Collection Account and to receive from the
Reserve Accounts (to the extent not required to be paid to the related
Borrower pursuant to the related Mortgage Loan Documents or applicable law)
any interest or other income earned on deposits therein.
As compensation for its activities hereunder, the Trustee
shall be entitled to the Trustee Fee with respect to each Mortgage Loan, which
shall be paid by the Servicer from its own funds without reimbursement
therefor. The Trustee shall pay the routine fees and expenses of the
Certificate Registrar, the Paying Agent, the Custodian and the Authenticating
Agent. The Trustee's rights to the Trustee Fee may not be transferred in whole
or in part except in connection with the transfer of all of the Trustee's
responsibilities and obligations under this Agreement.
Except as otherwise provided herein, the Servicer shall pay
all expenses incurred by it in connection with its servicing activities
hereunder and the Trustee shall pay all expenses incurred by it in connection
with its activities hereunder.
(b) As compensation for its activities hereunder, the
Special Servicer shall be entitled to the Special Servicing Fee with respect
to each Specially Serviced Mortgage Loan, which shall be payable from amounts
on deposit in the Collection Account as set forth in Section 3.6(iv). The
Special Servicer's rights to the Special Servicing Fee may not be transferred
in whole or in part except in connection with the transfer of all of the
Special Servicer's responsibilities and obligations under this Agreement. The
Special Servicer shall also be entitled pursuant to, and to the extent
provided in, Section 3.7(b) to withdraw from any REO Account any interest or
other income earned on deposits therein.
In addition, the Special Servicer shall be entitled to
receive, as additional Servicing Compensation, to the extent permitted by
applicable law and the related Notes and
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Mortgages, any late payment charges, late fees, Assumption Fees, loan
modification fees, extension fees, Financial and Lease Reporting Fees (to the
extent such fees are not required to be remitted to the related Borrower
pursuant to the related Note), loan service transaction fees, beneficiary
statement charges, or similar items (but not including any Default Interest or
Prepayment Premiums), in each case to the extent received with respect to any
Specially Serviced Mortgage Loan and not required to be deposited or retained
in the Collection Account pursuant to Section 3.5.
Except as otherwise provided herein, the Special Servicer
shall pay all expenses incurred by it in connection with its servicing
activities hereunder.
(c) In addition to other Special Servicer compensation
provided for in this Agreement, and not in lieu thereof, the Special Servicer
shall be entitled to the Disposition Fee payable out of the Liquidation
Proceeds prior to the deposit of the related Net Liquidation Proceeds in the
Collection Account.
(d) The Servicer, the Special Servicer and the Trustee shall
be entitled to reimbursement from the Trust Fund for the unanticipated costs
and expenses incurred by them in the performance of their duties under this
Agreement which are "unanticipated expenses incurred by the REMIC" within the
meaning of Treasury Regulations Section 1.860G-1(b)(3)(ii). Such expenses
shall include, by way of example and not by way of limitation, environmental
assessments, appraisals in connection with foreclosure, the fees and expenses
of any administrative or judicial proceeding and expenses expressly identified
as reimbursable in Section 3.6(vi).
(e) No provision of this Agreement or of the Certificates
shall require the Servicer, the Special Servicer, the Trustee or the Fiscal
Agent to expend or risk their own funds or otherwise incur any financial
liability in the performance of any of their duties hereunder or thereunder,
or in the exercise of any of their rights or powers, if, in the good faith
business judgment of the Servicer, Special Servicer, Trustee or the Fiscal
Agent, as the case may be, repayment of such funds would not be ultimately
recoverable from late payments, Insurance Proceeds, Condemnation Proceeds, Net
Liquidation Proceeds and other collections on or in respect of the Mortgage
Loans, or from adequate indemnity from other assets comprising the Trust Fund
against such risk or liability.
If the Servicer, the Special Servicer or the Trustee
receives a request or inquiry from a Borrower, any Certificateholder or any
other Person the response to which would, in the Servicer's, the Special
Servicer's or the Trustee's good faith business judgment, require the
assistance of Independent legal counsel or other consultant to the Servicer,
the Special Servicer or the Trustee, the cost of which would not be an expense
of the Trust Fund hereunder, then the Servicer, the Special Servicer or the
Trustee, as the case may be, shall not be required to take any action in
response to such request or inquiry unless such Borrower or such
Certificateholder or such other Person, as applicable, makes arrangements for
the payment of the Servicer's, the Special Servicer's or Trustee's expenses
associated with such counsel or other consultant (including, without
limitation, posting an advance payment for such expenses) satisfactory to the
Servicer, the Special Servicer or the Trustee, as the case may be, in its sole
discretion. Unless
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such arrangements have been made, the Servicer, the Special Servicer or the
Trustee, as the case may be, shall have no liability to any Person for the
failure to respond to such request or inquiry.
SECTION 3.13. Reports to the Trustee; Collection
Account Statements.
(a) The Servicer shall deliver to the Paying Agent, with a
copy to the Trustee, the Fiscal Agent and each Rating Agency, no later than
the ____ Business Day following each Determination Date, but in any event no
later than the ______ Business Day prior to the related Distribution Date, (i)
the Servicer Remittance Report with respect to such Determination Date (which
shall include, without limitation, the amount of Pooled Available Funds for
the related Distribution Date) and (ii) a written statement of required P&I
Advances for the related Determination Date together with the certificate and
documentation required by the definition of Nonrecoverable Advance related to
any determination that any such P&I Advance would constitute a Nonrecoverable
Advance made as of such Determination Date.
(b) For so long as the Servicer makes deposits into and
withdrawals from the Collection Account, not later than ______ days after each
Distribution Date, the Servicer shall forward to the Trustee a statement
prepared by the Servicer setting forth the status of the Collection Account as
of the close of business on the ____ Business Day of the related Collection
Period showing the aggregate amount of deposits into and withdrawals from the
Collection Account for each category of deposit specified in Section 3.5 and
each category of withdrawal specified in Section 3.6 for such Collection
Period. The Trustee and its agents and attorneys may at any time during normal
business hours, upon reasonable notice, inspect and copy the books, records
and accounts of the Servicer with respect to the Mortgage Loans and the
performance of its duties hereunder.
(c) The Trustee shall be entitled to rely conclusively on
and shall not be responsible for the content or accuracy of any information
provided to it by the Servicer or the Special Servicer pursuant to this
Agreement.
SECTION 3.14. Annual Statement as to Compliance.
The Servicer and the Special Servicer shall deliver to the
Trustee and to the Depositor on or before March 31 of each year, beginning
_________ with , an Officer's Certificate stating, as to each signatory
thereof, (i) that a review of the activities of the Servicer or the Special
Servicer, as applicable, during the preceding calendar year (or such shorter
period from the Closing Date to the end of the related calendar year) and of
its performance under this Agreement has been made under such officer's
supervision, (ii) that, to the best of such officer's knowledge, based on such
review, it has fulfilled all of its obligations under this Agreement
throughout such year (or such shorter period), or, if there has been a default
in the fulfillment of any such obligation, specifying each such default known
to such officer, the nature and status thereof and what action it proposes to
take with respect thereto, (iii) that, to the best of such officer's
knowledge, each sub-servicer has fulfilled its obligations under its
sub-servicing agreement in all material respects, or, if there has been a
material default in the fulfillment of such obligations, specifying each such
default known to such officer and the nature and status
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thereof, and (iv) whether it has received any notice regarding qualification,
or challenging the status, of the Upper-Tier REMIC or Lower-Tier REMIC as a
REMIC from the IRS or any other governmental agency or body.
SECTION 3.15. Annual Independent Public Accountants'
Servicing Report.
On or before March 31 of each year, beginning with _________
, the Servicer and the Special Servicer at its expense shall cause a firm of
nationally recognized Independent public accountants (who may also render
other services to the Servicer or the Special Servicer, as applicable) which
is a member of the American Institute of Certified Public Accountants to
furnish a statement to the Trustee and to the Depositor, to the effect that
such firm has examined certain documents and records relating to the servicing
of the Mortgage Loans under this Agreement and that, on the basis of such
examination conducted substantially in compliance with generally accepted
auditing standards and the Uniform Single Attestation Program for Mortgage
Bankers or the Audit Program for Mortgages serviced for FHLMC, such servicing
has been conducted in compliance with this Agreement except for such
significant exceptions or errors in records that, in the opinion of such firm,
generally accepted auditing standards and the Uniform Single Attestation
Program for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC require it to report, in which case such exceptions and errors shall be
so reported.
SECTION 3.16. Access to Certain Documentation.
(a) The Servicer and the Special Servicer shall provide to
any Certificateholders that are federally insured financial institutions, the
Federal Reserve Board, the FDIC and the OTS and the supervisory agents and
examiners of such boards and such corporations, and any other governmental or
regulatory body to the jurisdiction of which any Certificateholder is subject,
access to the documentation regarding the Mortgage Loans required by
applicable regulations of the Federal Reserve Board, FDIC, OTS or any such
governmental or regulatory body, such access being afforded without charge but
only upon reasonable request and during normal business hours at the offices
of the Servicer or the Special Servicer, as applicable.
(b) In connection with the solicitation of bids to purchase
the Mortgage Loans pursuant to Section 9.1(d), the Servicer and the Special
Servicer shall provide each Qualified Offeror who has paid the non-refundable
deposit required pursuant to Section 9.1(d)(vi) with access to all documents
that the Auction Agent considers material to prospective purchasers in
connection with their evaluation of the purchase of the Mortgage Loans and
shall cooperate with the Auction Agent in order to facilitate prospective
purchasers' due diligence in accordance with the Auction Procedures, including
without limitation the provision of facilities in which copies of each
Mortgage File may be reviewed, provision of facilities for the photocopying of
documents relating to Mortgages in return for payment of expenses of such
photocopying, cooperation in arranging access to Mortgaged Properties and such
other matters as the Auction Agent may reasonably request; provided, however,
that the Servicer or the Special Servicer, as applicable, shall be entitled to
be compensated by Qualified Offerors for its costs of providing such access,
cooperation and facilities.
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(c) Nothing in this Section 3.16 shall detract from the
obligation of the Servicer or the Special Servicer to observe any applicable
law prohibiting disclosure of information with respect to the Borrowers or the
Mortgage Loans, and the failure of the Servicer or the Special Servicer, as
applicable, to provide access as provided in this Section 3.16 as a result of
such obligation shall not constitute a breach of this Section 3.16.
SECTION 3.17. Title and Management of REO Properties.
(a) In the event that title to any Mortgaged Property is
acquired for the benefit of Certificateholders in foreclosure, by deed in lieu
of foreclosure or upon abandonment or reclamation from bankruptcy, the deed or
certificate of sale shall be taken in the name of the Trustee, or its nominee
(which shall not include the Servicer), or a separate trustee or co-trustee,
on behalf of the Trust Fund. The Special Servicer shall maintain accurate
records with respect to each related REO Property reflecting the status of
taxes, assessments and other similar items that are or may become a lien on
such REO Property and the status of insurance premiums payable with respect
thereto. The Special Servicer, on behalf of the Trust Fund, shall dispose of
any REO Property within two years after the Trust Fund acquires ownership of
such REO Property for purposes of Section 860G(a)(8) of the Code, unless (i)
the Special Servicer, on behalf of the Lower-Tier REMIC, has applied for and
received an extension of such two-year period pursuant to Sections 856(e)(3)
and 860G(a)(8)(A) of the Code, in which case the Special Servicer shall sell
such REO Property within the applicable extension period or (ii) the Special
Servicer seeks and subsequently receives an Opinion of Counsel (which opinion
shall be an expense of the Trust Fund), addressed to the Special Servicer and
the Trustee, to the effect that the holding by the Trust Fund of such REO
Property for an additional specified period will not cause such REO Property
to fail to qualify as "foreclosure property" within the meaning of Section
860G(a)(8) of the Code (determined without regard to the exception applicable
for purposes of Section 860D(a) of the Code) at any time that any Certificate
is outstanding, in which case the Special Servicer shall sell such REO
Property within such two-year period as extended by such additional specified
period subject to any conditions set forth in such Opinion of Counsel. The
Special Servicer, on behalf of the Trust Fund, shall dispose of any REO
Property held by the Trust Fund prior to the ____ day of the period (taking
into account extensions) within which such REO Property is required to be
disposed of pursuant to the provisions of the immediately preceding sentence
in a manner provided under Section 3.18 hereof. The Special Servicer shall
manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its disposition and sale in a
manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code
(determined without regard to the exception applicable for purposes of Section
860D(a)).
(b) The Special Servicer shall have full power and
authority, subject only to the specific requirements and prohibitions of this
Agreement, to do any and all things in connection with any REO Property as are
consistent with the manner in which the Special Servicer manages and operates
similar property owned or managed by the Special Servicer or any of its
Affiliates, all on such terms and for such period as the Special Servicer
deems to be in the best interests of Certificateholders, and, in connection
therewith, the Special Servicer shall agree to the payment of management fees
that are consistent with general market standards. The
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Special Servicer shall segregate and hold all revenues received by it with
respect to any REO Property separate and apart from its own funds and general
assets and shall establish and maintain with respect to any REO Property a
segregated custodial account (each, an "REO Account"), each of which shall be
an Eligible Account and shall be entitled " __________ , as Trustee, in trust
for Holders of Prudential Securities Secured Financing Corporation, Commercial
Mortgage Pass-Through Certificates, Series __________ , REO Account." The
Special Servicer shall be entitled to any interest or investment income earned
on funds deposited in an REO Account to the extent provided in Section 3.7(b).
The Special Servicer shall deposit or cause to be deposited in the related REO
Account within ___ Business Day after receipt all REO Proceeds received by it
with respect to any REO Property (other than Liquidation Proceeds), and shall
withdraw therefrom funds necessary for the proper operation, management and
maintenance of such REO Property and for other Property Protection Expenses
with respect to such REO Property, including:
(i) all insurance premiums due and payable in respect
of such REO Property;
(ii) all real estate taxes and assessments in respect of
such REO Property that may result in the imposition
of a lien thereon; and
(iii) all costs and expenses reasonable and necessary to
protect, maintain, manage, operate, repair and
restore such REO Property, including any property
management fees.
To the extent that such REO Proceeds are insufficient for
the purposes set forth in clauses (i) through (iii) above, the Servicer (or,
in the event the Servicer is unable to perform, the Trustee or Fiscal Agent)
shall make an Advance equal to the amount of such shortfall unless the
Servicer determines, in its good faith judgment, that such Advance would be a
Nonrecoverable Advance. The Servicer shall be entitled to reimbursement of
such Advances (with interest at the Advance Rate) made pursuant to the
preceding sentence, to the extent permitted pursuant to Section 3.6. The
Special Servicer shall remit to the Servicer from each REO Account for deposit
in the Collection Account on a monthly basis prior to the related Remittance
Date the Net REO Proceeds received or collected from the related REO Property,
except that in determining the amount of such Net REO Proceeds, the Special
Servicer may retain in such REO Account reasonable reserves for repairs,
replacements and necessary capital improvements and other related expenses.
Notwithstanding the foregoing, the Special Servicer shall not:
(i) permit the Trust Fund to enter into, renew or
extend any New Lease if the New Lease, by its
terms, will give rise to any income that does not
constitute Rents from Real Property;
(ii) permit any amount to be received or accrued under
any New Lease other than amounts that will
constitute Rents from Real Property;
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(iii) authorize or permit any construction on any REO
Property, other than the repair or maintenance
thereof or the completion of a building or other
improvement thereon, and then only if more than ten
percent of the construction of such building or
other improvement was completed before default on
the related Mortgage Loan became imminent, all
within the meaning of Section 856(e)(4)(B) of the
Code; or
(iv) Directly Operate or perform any construction work
on, or allow any Person (other than an Independent
Contractor) to Directly Operate or perform any
construction work on, any REO Property on, any date
more than __ days after its date of acquisition by
the Trust Fund;
unless, in any such case, the Special Servicer has requested and received an
Opinion of Counsel addressed to the Special Servicer and the Trustee (which
opinion shall be an expense of the Trust Fund) to the effect that such action
will not cause such REO Property to fail to qualify as "foreclosure property"
within the meaning of Section 860G(a)(8) of the Code (determined without
regard to the exception applicable for purposes of Section 860D(a) of the
Code) at any time that it is held by the Trust Fund, in which case the Special
Servicer may take such actions as are specified in such Opinion of Counsel.
The Special Servicer shall be required to contract with an
Independent Contractor for the operation and management of any REO Property
within __ days of the Trust Fund's acquisition thereof (unless the Special
Servicer shall have provided the Trustee with an Opinion of Counsel that the
operation and management of such REO Property other than through an
Independent Contractor shall not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Code Section 860G(a)(8)) (which
opinion shall be an expense of the Trust Fund), provided that:
(i) the terms and conditions of any such contract shall
be reasonable and customary for the area and type
of property and shall not be inconsistent herewith;
(ii) any such contract shall require, or shall be
administered to require, that the Independent
Contractor pay all costs and expenses incurred in
connection with the operation and management of
such REO Property, including those listed above,
and remit all related revenues (net of such costs
and expenses) to the Special Servicer as soon as
practicable, but in no event later than _____ days
following the receipt thereof by such Independent
Contractor;
(iii) none of the provisions of this Section 3.17(b)
relating to any such contract or to actions taken
through any such Independent Contractor shall be
deemed to relieve the Special Servicer of any of
its duties and obligations to the Trust Fund or the
Trustee on behalf of the Certificateholders with
respect to the operation and management of any such
REO Property; and
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(iv) the Special Servicer shall be obligated with
respect thereto to the same extent as if it alone
were performing all duties and obligations in
connection with the operation and management of
such REO Property.
The Special Servicer shall be entitled to enter into any
agreement with any Independent Contractor performing services for it related
to its duties and obligations hereunder for indemnification of the Special
Servicer by such Independent Contractor, and nothing in this Agreement shall
be deemed to limit or modify such indemnification.
(c) Promptly following any acquisition by the Trust Fund of
an REO Property, the Special Servicer shall obtain (i) an update of any
appraisal performed pursuant to Section 3.10 which is more than ___ months
old, or (ii) to the extent that an appraisal has not been obtained pursuant to
such Section, an appraisal of such REO Property by an Independent appraiser
familiar with the area in which such REO Property is located in order to
determine the fair market value of such REO Property and shall notify the
Depositor and the Trustee of the results of such appraisal. Any such appraisal
shall be conducted in accordance with MAI standards and the cost thereof shall
be an expense of the Trust Fund.
(d) When and as necessary, the Special Servicer shall send
to the Trustee a statement prepared by the Special Servicer setting forth the
amount of net income or net loss, as determined for federal income tax
purposes, resulting from the operation and management of a trade or business
on, the furnishing or rendering of a non-customary service to the tenants of,
or the receipt of any other amount not constituting Rents from Real Property
in respect of, any REO Property in accordance with Section 3.17(b).
SECTION 3.18. Sale of Specially Serviced Mortgage Loans
and REO Properties.
(a) With respect to any Specially Serviced Mortgage Loan or
REO Property which the Special Servicer has determined to sell in accordance
with Section 3.10 or otherwise, the Special Servicer shall deliver to the
Trustee an Officer's Certificate to the effect that the Special Servicer has
determined to sell such Specially Serviced Mortgage Loan or REO Property in
accordance with this Section 3.18. The Special Servicer may then offer to sell
to any Person such Specially Serviced Mortgage Loan or such REO Property but
shall, in any event, so offer to sell such REO Property no later than the time
determined by the Special Servicer to be sufficient to result in the sale of
such REO Property within the period specified in Section 3.17(a). The Special
Servicer shall deliver such Officer's Certificate and give the Trustee not
less than __ Business Days prior written notice of its
intention to sell such Specially Serviced Mortgage Loan or REO Property, in
which case the Special Servicer shall accept any offer received from any
Person that is determined by the Special Servicer to be a fair price, as
determined in accordance with Section 3.18(b), for such Specially Serviced
Mortgage Loan or REO Property if the offeror is a Person other than an
Interested Person, or is determined to be such a price by the Trustee if the
offeror is an Interested Person; provided, however, that the Trustee shall be
entitled to engage at the expense of the Trust Fund, an Independent appraiser
to determine whether the offer is a fair price. Notwithstanding anything to
the contrary herein,
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neither the Trustee in its individual capacity nor any of its Affiliates, may
make an offer or purchase any Specially Serviced Mortgage Loan or any REO
Property pursuant hereto.
In addition, in the event that the Special Servicer receives
more than one fair offer with respect to any Specially Serviced Mortgage Loan
or REO Property, the Special Servicer may accept an offer that is not the
highest fair offer if it determines, in accordance with the Servicing
Standard, that acceptance of such offer would be in the best interests of the
Certificateholders (for example, if the prospective buyer making the lower
offer is more likely to perform its obligations, or the terms offered by the
prospective buyer making the lower offer are more favorable). In the event
that the Special Servicer determines with respect to any REO Property that the
offers being made with respect thereto are not in the best interests of the
Certificateholders and that the end of the two-year period referred to in
Section 3.17(a) with respect to such REO Property is approaching, the Special
Servicer shall seek an extension of such two-year period in the manner
described in Section 3.17(a); provided, however, that the Special Servicer
shall use its best efforts in accordance with the Servicing Standard, to sell
any REO Property no later than the day prior to the Determination Date
immediately prior to the Scheduled Final Distribution Date.
(b) In determining whether any offer received represents a
fair price for any Specially Serviced Mortgage Loan or any REO Property, the
Special Servicer or the Trustee may conclusively rely on the opinion of an
Independent appraiser or other expert in real estate matters retained by the
Special Servicer or the Trustee at the expense of the Trust Fund. In
determining whether any offer constitutes a fair price for any Specially
Serviced Mortgage Loan or any REO Property, the Special Servicer or the
Trustee (or, if applicable, such appraiser) shall take into account, and any
appraiser or other expert in real estate matters shall be instructed to take
into account, the appraisal obtained pursuant to Section 3.10(a) and, as
applicable, among other factors, the period and amount of any delinquency on
such Specially Serviced Mortgage Loan, the physical (including environmental)
condition of the related Mortgaged Property or such REO Property, the state of
the local economy and the Trust Fund's obligation to dispose of any REO
Property within the time period specified in Section 3.17(a).
(c) Subject to the provisions of Section 3.17, the Special
Servicer shall act on behalf of the Trust Fund in negotiating and taking any
other action necessary or appropriate in connection with the sale of any
Specially Serviced Mortgage Loan or REO Property, including the collection of
all amounts payable in connection therewith. Any sale of a Specially Serviced
Mortgage Loan or any REO Property shall be without recourse to, or
representation or warranty by, the Trustee, the Depositor, the Servicer, the
Special Servicer or the Trust Fund (except that any contract of sale and
assignment and conveyance documents may contain customary warranties of title,
so long as the only recourse for breach thereof is to the Trust Fund), and, if
such sale is consummated in accordance with the duties of the Special
Servicer, the Servicer, the Depositor and the Trustee pursuant to the terms of
this Agreement, no such Person who so performed shall have any liability to
the Trust Fund or any Certificateholder with respect to the purchase price
therefor accepted by the Special Servicer or the Trustee.
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(d) Net Liquidation Proceeds related to any such sale shall
be promptly, and in any event within ___ Business Day following receipt
thereof, deposited in the Collection Account in accordance with Section
3.5(a)(iv).
SECTION 3.19. Inspections.
The Servicer (or, with respect to Specially Serviced
Mortgage Loans and REO Properties, the Special Servicer) shall inspect or
cause to be inspected (at its own expense) each Mortgaged Property at such
times and in such manner as are consistent with the Servicing Standard, but in
any event (i) ____________ inspect each Mortgaged Property at least once every
___ months commencing in unless each of the Rating Agencies has confirmed in
writing that a longer period between inspections shall not result, in and of
itself, in a downgrading, withdrawal or qualification of the rating then
assigned by such Rating Agency to any Class of the Certificates; (ii) if the
Servicer or the Special Servicer retains any Financial and Lease Reporting
Fees pursuant to Section 3.12, each related Mortgaged Property shall be
inspected by the Servicer or the Special Servicer, as applicable, as soon as
practicable thereafter, except to the extent such Mortgaged Property has been
inspected by the Servicer or the Special Servicer within the immediately
preceding ___ days; and (iii) if any Monthly Payment becomes more than __ days
delinquent (without giving effect to any grace period permitted under the
related Note or Mortgage), each related Mortgaged Property shall be inspected
by the Special Servicer (at its own expense) as soon as practicable
thereafter.
SECTION 3.20. Available Information and Notices.
The Servicer or the Special Servicer, if applicable, shall
promptly give notice to the Trustee, who will copy each Certificateholder,
each Rating Agency, the Depositor and the Mortgage Loan Seller of (a) any
notice from a Borrower or insurance company regarding an upcoming voluntary or
involuntary prepayment (including that resulting from a casualty or
condemnation) of all or part of the related Mortgage Loan (provided that a
request by a Borrower or other party for a quotation of the amount necessary
to satisfy all obligations with respect to a Mortgage Loan shall not, in and
of itself, be deemed to be such notice); and (b) of any other occurrence known
to it with respect to a Mortgage Loan or REO Property that the Servicer or the
Special Servicer determines, in accordance with the Servicing Standard, would
have a material effect on such Mortgage Loan or REO Property, which notice
shall include an explanation as to the reason for such material effect
(provided that any extension of the term of any Mortgage Loan shall be deemed
to have a material effect).
Neither the Servicer nor the Special Servicer shall be
responsible for the accuracy or completeness of any information supplied to it
by a Borrower or otherwise for inclusion in any such notice, and the Servicer,
the Special Servicer and the Trustee shall be indemnified and held harmless by
the Trust Fund against any loss, liability or expense incurred in connection
with any legal action relating to any statement or omission or alleged
statement or omission therein, including any liability related to the
inclusion of such information in any report filed with the Commission.
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In addition to the other reports and information made
available and distributed to the Depositor, the Trustee or the
Certificateholders pursuant to other provisions of this Agreement, the
Servicer and the Special Servicer shall, in accordance with such reasonable
rules and procedures as it may adopt (which may include the requirement that
an agreement governing the availability, use and disclosure of such
information be executed to the extent the Servicer or the Special Servicer, as
applicable, deems such action to be necessary or appropriate), also make
available any information relating to the Mortgage Loans, the Mortgaged
properties or the Borrower for review by the Depositor, the Trustee, the
Certificateholders and any other Persons to whom the Servicer or the Special
Servicer, as the case may be, believes such disclosure is appropriate, in each
case except to the extent doing so is prohibited by applicable law or by any
documents related to a Mortgage Loan.
The Trustee shall also make available at its offices
primarily responsible for administration of the Trust Fund, during normal
business hours, for review by the Depositor, any Certificateholder, any Person
identified to the Trustee by a Certificateholder as a prospective transferee
of a Certificate and any other Persons to whom the Trustee believes such
disclosure is appropriate, the following items: (i) this Agreement, (ii) all
monthly statements to Certificateholders delivered since the Closing Date
pursuant to Section 4.2(a), (iii) all annual statements as to compliance
delivered to the Trustee and the Depositor pursuant to Section 3.14 and (iv)
all annual Independent accountants' reports delivered to the Trustee and the
Depositor pursuant to Section 3.15. The Servicer or the Special Servicer, as
appropriate, shall make available at its offices during normal business hours,
for review by the Depositor, the Trustee, any Certificateholder, any Person
identified to the Servicer or the Special Servicer, as applicable, by a
Certificateholder as a prospective transferee of a Certificate and any other
Persons to whom the Servicer or the Special Servicer, as applicable, believes
such disclosure is appropriate, the following items: (i) the inspection
reports prepared by or on behalf of the Servicer or the Special Servicer, as
applicable, in connection with the property inspections conducted by the
Servicer or the Special Servicer, as applicable, pursuant to Section 3.19,
(ii) any and all modifications, waivers and amendments of the terms of a
Mortgage Loan entered into by the Servicer or the Special Servicer and (iii)
any and all Officer's Certificates and other evidence delivered to the Trustee
and the Depositor to support the Servicer's determination that any Advance
was, or if made would be, a Nonrecoverable Advance, in each case except to the
extent doing so is prohibited by applicable laws or by any documents related
to a Mortgage Loan. Copies of any and all of the foregoing items shall be
available from the Servicer, the Special Servicer or the Trustee, as
applicable, upon request. The Servicer, the Special Servicer and the Trustee
shall be permitted to require payment (other than from any Rating Agency) of
a sum sufficient to cover the reasonable costs and expenses incurred by it in
providing copies of or access to any information requested in accordance with
the previous sentence.
The Servicer shall, on behalf of the Trust Fund, prepare,
sign and file with the Commission any and all reports, statements and
information respecting the Trust Fund which the Servicer or the Trustee
determines are required to be filed with the Commission pursuant to Sections
13(a) or 15(d) of the 1934 Act, each such report, statement and information to
be filed on or prior to the required filing date for such report, statement or
information. Notwithstanding the foregoing, the Depositor shall file with the
Commission, within ______ days of the Closing Date, a Current Report on Form
8-K together with this Agreement.
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Neither the Servicer not the Trustee shall be responsible
for the accuracy or completeness of any information supplied to it by a
Borrower or a third party that is included in any report, statement or
information filed with the Commission, and both the Servicer and the Trustee
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
any statement or omission or alleged statement or omission therein resulting
from such information.
SECTION 3.21. Reserve Accounts.
The Servicer shall administer each Reserve Account in
accordance with the related Note, Mortgage and Loan Agreement.
SECTION 3.22. Property Advances.
(a) The Servicer (or, to the extent provided in Section
3.22(b), the Trustee or the Fiscal Agent) shall make any Property Advances as
and to the extent otherwise required pursuant to the terms hereof. For purpose
of calculating distributions to the Certificateholders, Property Advances
shall not be considered to increase the principal balance of any Mortgage
Loan, notwithstanding that the terms of such Mortgage Loan so provide.
(b) The Servicer shall notify the Trustee and the Fiscal
Agent in writing promptly upon, and in any event within ___ Business Day
after, becoming aware that it will be financially unable to make any Property
Advance required to be made pursuant to the terms hereof, and in connection
therewith, shall set forth in such notice the amount of such Property Advance,
the Person to whom it should be paid, and the circumstances and purpose of
such Property Advance, and shall set forth therein information and
instructions for the payment of such Property Advance, and, on the date
specified in such notice for the payment of such Property Advance, or, if no
such date is specified, then within ___ Business Day following such notice,
the Trustee shall pay the amount of such Property Advance in accordance with
such information and instructions. If the Trustee fails to make any Property
Advance required to be made under this Section 3.22, the Fiscal Agent shall
make such Advance on the same day the Trustee was required to make such Property
Advance and, thereby, the Trustee shall not be in default under this Agreement.
(c) Notwithstanding anything herein to the contrary, none of
the Servicer, the Trustee or the Fiscal Agent shall be obligated to make a
Property Advance as to any Mortgage Loan or REO Property if the Servicer, the
Trustee or the Fiscal Agent as applicable, determines that such Property
Advance, if made, would be a Nonrecoverable Advance. The Trustee and the
Fiscal Agent shall be entitled to rely, conclusively, on any determination by
the Servicer that a Property Advance, if made, would be a Nonrecoverable
Advance. The Trustee and the Fiscal Agent, in determining whether or not a
Property Advance previously made is, or a proposed Property Advance, if made,
would be, a Nonrecoverable Advance shall be subject to the standards
applicable to the Servicer hereunder.
(d) The Servicer, the Trustee and/or the Fiscal Agent, as
applicable, shall be entitled to, and the Servicer hereby covenants and agrees
to promptly seek and effect, the
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reimbursement of Property Advances to the extent permitted pursuant to Section
3.6(ii) of this Agreement, together with any related Advance Interest Amount in
respect of such Property Advances.
(e) The Servicer, the Trustee and/or the Fiscal Agent shall
not be required to make a Property Advance for any amounts required to cure
any failure of any Mortgaged Property to comply with the Americans with
Disabilities Act of 1990, as amended, and all rules and regulations
promulgated pursuant thereto, and, in the case of an REO Property, such
amounts shall be an expense of the Trust Fund.
SECTION 3.23. Appointment of Special Servicer.
(a) ___________ is hereby appointed as the initial Special
Servicer to service each Specially Serviced Mortgage Loan.
(b) Certificateholders representing greater than __% of the
Voting Rights of the most subordinate Class of Regular Certificates
outstanding at any time shall be entitled to remove the Special Servicer with
or without cause and to appoint a successor Special Servicer, provided that
each Rating Agency confirms to the Trustee in writing that such appointment
shall not, in and of itself, cause a withdrawal, downgrading or qualification
of the then-current ratings assigned to any Class of Certificates.
(c) The appointment of any such successor Special Servicer
shall not relieve the Servicer, the Trustee or the Fiscal Agent of their
respective obligations to make Advances as set forth herein. Any termination
fee payable to the terminated Special Servicer (and it is hereby acknowledged
that there is no such fee payable in the event of a termination of ________ as
Special Servicer) shall be paid by the Certificateholders so terminating the
Special Servicer and shall not in any event be an expense of the Trust Fund.
(d) No termination of the Special Servicer and appointment
of a successor Special Servicer shall be effective until the successor Special
Servicer has assumed all of its responsibilities, duties and liabilities
hereunder pursuant to a writing satisfactory to the Trustee and each of the
Rating Agencies confirms to the Trustee in writing that such assumption shall
not result, in and of itself, in a downgrading, withdrawal or qualification of
the rating then assigned by such Rating Agency to any Class of the
Certificates.
SECTION 3.24. Transfer of Servicing Between Servicer and
Special Servicer; Record Keeping.
(a) Upon determining that any Mortgage Loan has become a
Specially Serviced Mortgage Loan, the Servicer shall immediately give notice
thereof, together with a copy of the related Mortgage File, to the Special
Servicer and shall use its best efforts to provide the Special Servicer with
all information, documents (but excluding the original documents constituting
such Mortgage File) and records (including records stored electronically on
computer tapes, magnetic discs and the like) relating to such Mortgage Loan
and reasonably requested by the Special Servicer to enable it to assume its
duties hereunder with respect thereto
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without acting through a sub-servicer. The Servicer shall use its best efforts
to comply with the preceding sentence within ____ Business Days of the date
such Mortgage Loan became a Specially Serviced Mortgage Loan and in any event
shall continue to act as Servicer and administrator of such Mortgage Loan
until the Special Servicer has commenced the servicing of such Mortgage Loan,
which shall occur upon the receipt by the Special Servicer of the information,
documents and records referred to in the preceding sentence. With respect to
each Mortgage Loan that becomes a Specially Serviced Mortgage Loan, the
Servicer shall instruct the related Borrower to continue to remit all payments
in respect of such Mortgage Loan to the Servicer. If ceases to be the Servicer
or ceases to be the Special Servicer, the remaining party of the two and the
successor Servicer or Special Servicer, as applicable, may agree that,
notwithstanding the preceding sentence, with respect to each Mortgage Loan
that became a Specially Serviced Mortgage Loan, the Servicer shall instruct
the related Borrower to remit all payments in respect of such Mortgage Loan to
the Special Servicer, provided that the payee in respect of such payments
shall remain the Servicer.
Upon determining that no event has occurred and is
continuing with respect to a Mortgage Loan that causes such Mortgage Loan to
be a Specially Serviced Mortgage Loan, the Special Servicer shall immediately
give notice thereof to the Servicer and upon giving such notice, such Mortgage
Loan shall cease to be a Specially Serviced Mortgage Loan pursuant to the
proviso to the definition of Specially Serviced Mortgage Loan, the Special
Servicer's obligation to service such Mortgage Loan shall terminate and the
obligations of the Servicer to service and administer such Mortgage Loan as a
Mortgage Loan that is not a Specially Serviced Mortgage Loan shall resume. In
addition, if the related Borrower has been instructed, pursuant to the last
sentence of the preceding paragraph, to make payments to the Special Servicer,
upon such determination, the Special Servicer shall instruct such Borrower to
remit all payments in respect of such Mortgage Loan that is no longer a
Specially Serviced Mortgage Loan directly to the Servicer.
(b) In servicing any Specially Serviced Mortgage Loan, the
Special Servicer shall provide to the Trustee originals of documents included
within the definition of "Mortgage File" for inclusion in the related Mortgage
File (to the extent such documents are in the possession of the Special
Servicer) and copies of any additional related Mortgage Loan information,
including correspondence with the related Borrower, and the Special Servicer
shall provide copies of all of the foregoing to the Servicer.
(c) Not later than the Business Day preceding each date on
which the Servicer is required to furnish a report under Section 3.13 to the
Trustee, the Special Servicer shall deliver to the Servicer a written
statement describing, on a Mortgage Loan-by-Mortgage Loan basis, (1) the
amount of all payments on account of interest received on each Specially
Serviced Mortgage Loan; the amount of all payments on account of principal,
including Principal Prepayments, on each Specially Serviced Mortgage Loan; the
amount of Insurance Proceeds and Liquidation Proceeds received with respect to
each Specially Serviced Mortgage Loan; and the amount of net income or net
loss, as determined for management of a trade or business on, or the
furnishing or rendering of a non-customary service to the tenants of, each REO
Property that previously secured a Specially Serviced Mortgage Loan, in each
case in accordance with Section
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3.17 and (2) such additional information relating to the Specially Serviced
Mortgage Loans as the Servicer reasonably requests to enable it to perform its
duties under this Agreement.
(d) Notwithstanding the provisions of the preceding
subsection (c), the Servicer shall maintain ongoing payment records with
respect to each of the Specially Serviced Mortgage Loans and shall provide the
Special Servicer with any information reasonably required by the Special
Servicer to perform its duties under this Agreement. The Special Servicer
shall provide the Servicer with any information reasonably required by the
Servicer to perform its duties under this Agreement.
SECTION 3.25. Adjustment of Servicing Compensation in Respect
of Prepayment Interest Shortfalls.
(a) The aggregate amount of the Prepayment Interest Surplus
and Servicing Fees (in that order) that the Servicer shall be entitled to
receive with respect to all of the Mortgage Loans on each Distribution Date
shall be offset on such Distribution Date by an amount equal to the aggregate
of the Prepayment Interest Shortfalls for such Distribution Date with respect
to all Mortgage Loans. The Servicer shall include the amount by which the
aggregate Servicing Fees and Prepayment Interest Surplus is offset pursuant to
this Section 3.25 as part of the Pooled Available Funds on such Distribution
Date. The amount of any offset against the aggregate Servicing Fees and
Prepayment Interest Surplus with respect to any Distribution Date under this
Section 3.25 shall be limited to the aggregate amount of the Servicing Fees
and Prepayment Interest Surplus otherwise payable to the Servicer on such
Distribution Date (without adjustment on account of Prepayment Interest
Shortfalls) and the rights of the Certificateholders to offset of the
aggregate Prepayment Interest Shortfalls shall not be cumulative. To the
extent the Servicer shall already have withdrawn or withheld Servicing
Compensation required to pay Prepayment Interest Shortfalls, the Servicer
shall promptly deposit in the Collection Amount such amounts to the extent
required to pay Prepayment Interest Shortfalls hereunder.
(b) To the extent that the Servicer and the Special Servicer
are the same Person, the aggregate amount of the Special Servicing Fees that
the Special Servicer shall be entitled to receive with respect to all of the
Specially Serviced Mortgage Loans on each Distribution Date shall be offset on
such Distribution Date by an amount equal to the excess of (X) the aggregate
of the Prepayment Interest Shortfalls for such Distribution Date with respect
to all Mortgage Loans over (Y) the amount of Servicing Fees offset against
such Prepayment Interest Shortfalls in accordance with Section 3.25(a). The
Servicer shall include the amount by which the aggregate Special Servicing Fee
is offset pursuant to this Section 3.25 as part of the Pooled Available Funds
on such Distribution Date. The amount of any offset against the aggregate
Special Servicing Fee with respect to any Distribution Date under this Section
3.25 shall be limited to the aggregate amount of the Special Servicing Fees
otherwise payable to the Special Servicer on such Distribution Date (without
adjustment on account of Prepayment Interest Shortfalls) and the rights of the
Certificateholders to offset of the aggregate Prepayment Interest Shortfalls
shall not be cumulative.
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SECTION 3.26. Extension Advisor.
The Special Servicer shall obtain the prior written approval
of the Extension Advisor in respect of any proposed modification of a Mortgage
Loan pursuant to Section 3.10(a) with respect to which three successive
extensions shall have already been granted. The Special Servicer shall advise
the Extension Advisor in a written report (in reasonable detail) if any such
modification after the third successive previous extension of such Mortgage
Loan with respect to a Specially Serviced Mortgage Loan is proposed and the
Special Servicer shall grant such extension only if the Extension Advisor
approves such extension in writing.
The Extension Advisory Fee shall be paid to the Extension
Advisor, first from loan modification fees paid by the Borrower under the
related Mortgage Loan as to which an extension was requested, and, to the
extent that such loan modification fees are insufficient to pay the Extension
Advisory Fee, any such shortfall shall be paid from the Servicing
Compensation; provided that the reduction in Servicing Compensation shall be
allocated equally between the Servicer and the Special Servicer.
The Extension Advisor may be replaced at any time by the
Holders of____% of the Voting Rights allocated to each Class of Regular
Certificates, other than the most subordinate such Class of Regular
Certificates, by written notice to the Extension Advisor, the Trustee and the
Special Servicer. Notwithstanding anything to the contrary contained herein,
in no event shall the Special Servicer be the Extension Advisor.
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ARTICLE IV
DISTRIBUTIONS TO CERTIFICATEHOLDERS
SECTION 4.1. Distributions.
(a) (I) On each Remittance Date, to the extent of Pooled
Available Funds, amounts held in the Collection Account shall be withdrawn and
remitted to the Trustee for deposit in the Distribution Account in the
following amounts:
(i) First, pro rata (A) to the Class ___ Interest in
respect of interest, (1) the Interest Distribution
Amount therefor, and (2) the aggregate unpaid
Interest Shortfalls allocated to the Class
____________ Interest on any prior Distribution
Date; (B) to the Class ________________ Interest in
respect of interest, (1) the Interest Distribution
Amount therefor, and (2) the aggregate unpaid
Interest Shortfalls allocated to the Class
_____________ Interest on any prior Distribution
Date; (C) to the Class ___________ Interest in
respect of interest, (1) the portion of the
Interest Distribution Amount therefor that is in
excess of interest thereon at the Class _________
Pass-Through Rate and (2) a proportionate amount of
any unpaid Interest Shortfalls allocated to the
Class ___________ Interest on any prior
Distribution Date; (D) to the Class __ Interest in
respect of interest, (1) the portion of the
Interest Distribution Amount therefor that is in
excess of interest thereon at the Class ________
Through Rate and (2) a proportionate amount of any
unpaid Interest Shortfalls allocated to the Class
___ Interest on any prior Distribution Date; (E) to
the Class ___ Interest in respect of interest, (1)
the portion of the Interest Distribution Amount
therefor that is in excess of interest thereon at
the Class __ Pass-Through Rate and (2) a
proportionate amount of any unpaid Interest
Shortfalls allocated to the Class ___ Interest on
any prior Distribution Date; and (F) to the Class
___ Interest in respect of interest, (1) the
portion of the Interest Distribution Amount
therefor that is in excess of interest thereon at
the Class __ Pass-Through Rate and (2) a
proportionate amount of any unpaid Interest
Shortfalls allocated to the Class ___ Interest on
any prior Distribution Date;
(ii) Second, to the Class ___ Interest, in reduction of
the Certificate Balance thereof, the Pooled
Principal Distribution Amount for such Distribution
Date, until the Certificate Balance thereof is
reduced to zero;
(iii) Third, to the Class _________ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ___% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the
date on which interest was last paid) to, but not
including, the Distribution Date following the
Remittance Date on which distributions in respect
of such unreimbursed Realized Loss are
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made pursuant to this subparagraph, up to an amount
equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such
Lower-Tier Regular Interest and interest thereon,
provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed
first in respect of any such interest and then in
respect of any such unreimbursed Realized Loss;
(iv) Fourth, to the Class ________ Interest, in
reduction of the Certificate Balance thereof, the
Pooled Principal Distribution Amount for such
Distribution Date, until the Certificate Balance
thereof is reduced to zero;
(v) Fifth, to the Class _________ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ___% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the
date on which interest was last paid) to, but not
including, the Distribution Date following the
Remittance Date on which distributions in respect
of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount
equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such
Lower-Tier Regular Interest and interest thereon,
provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed
first in respect of any such interest and then in
respect of any such unreimbursed Realized Loss;
(vi) Sixth, to the Class ___ Interest, in respect of
interest, (A) the portion of the Interest
Distribution Amount therefor that is equal to
interest thereon at the Class ___ Pass-Through Rate
and (B) a proportionate amount of the aggregate
unpaid Interest Shortfalls allocated to the Class
___ Interest on any prior Distribution Date;
(vii) Seventh, after the Certificate Balance of the Class
___ Interest has been reduced to zero, to the Class
___ Interest, in reduction of the Certificate
Balance thereof, the Pooled Principal Distribution
Amount less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause,
until the Certificate Balance of the Class ___
Interest is reduced to zero;
(viii) Eighth, to the Class ___ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ___% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the
date on which interest was last paid) to, but not
including, the Distribution Date following the
Remittance Date on which distributions in respect
of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount
equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such
Lower-Tier Regular Interest and interest thereon,
provided that any
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distribution pursuant to this subparagraph shall be
deemed to be distributed first in respect of any
such interest and then in respect of any such
unreimbursed Realized Loss;
(ix) Ninth, to the Class ___ Interest, in respect of
interest, (A) the portion of the Interest
Distribution Amount therefor that is equal to
interest thereon at the Class __ Pass-Through Rate
and (B) a proportionate amount of the aggregate
unpaid Interest Shortfalls allocated to the Class
__ Interest on any prior Distribution Date;
(x) Tenth, after the Certificate Balance of the Class
___ Interest has been reduced to zero, to the Class
___ Interest, in reduction of the Certificate
Balance thereof, the Pooled Principal Distribution
Amount less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause,
until the Certificate Balance of the Class ___
Interest is reduced to zero;
(xi) Eleventh, to the Class ___ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ____% per annum from the date on which
such unreimbursed Realized Loss was allocated (or
the date on which interest was last paid) to, but
not including, the Distribution Date following the
Remittance Date on which distributions in respect
of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount
equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such
Lower-Tier Regular Interest and interest thereon,
provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed
first in respect of any such interest and then in
respect of any such unreimbursed Realized Loss;
(xii) Twelfth, to the Class ___ Interest, in respect of
interest, (A) the portion of the Interest
Distribution Amount therefor that is equal to
interest thereon at the Class ___ Pass-Through Rate
and (B) a proportionate amount of the aggregate
unpaid Interest Shortfalls allocated to the Class
___ Interest on any prior Distribution Date;
(xiii) Thirteenth, after the Certificate Balance of the
Class ___ Interest has been reduced to zero, to the
Class ___ Interest, in reduction of the Certificate
Balance thereof, the Pooled Principal Distribution
Amount less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause,
until the Certificate Balance of the Class ___
Interest is reduced to zero;
(xiv) Fourteenth, to the Class ___ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ___% per annum from the date on which such
unreimbursed
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Realized Loss was allocated (or the date on which
interest was last paid) to, but not including, the
Distribution Date following the Remittance Date on
which distributions in respect of such unreimbursed
Realized Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized Losses
previously allocated to such Lower-Tier Regular
Interest and interest thereon, provided that any
distribution pursuant to this subparagraph shall be
deemed to be distributed first in respect of any
such interest and then in respect of any such
unreimbursed Realized Loss;
(xv) Fifteenth, to the Class ___ Interest, in respect of
interest, (A) the portion of the Interest
Distribution Amount therefor that is equal to
interest thereon at the Class __ Pass-Through Rate
and (B) a proportionate amount of the aggregate
unpaid Interest Shortfalls allocated to the Class
___ Interest on any prior Distribution Date;
(xvi) Sixteenth, after the Certificate Balance of the
Class ___ Interest has been reduced to zero, to the
Class ___ Interest, in reduction of the Certificate
Balance thereof, the Pooled Principal Distribution
Amount less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause,
until the Certificate Balance of the Class ___
Interest is reduced to zero;
(xvii) Seventeenth, to the Class ___ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ___% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the
date on which interest was last paid) to, but not
including, the Distribution Date following the
Remittance Date on which distributions in respect
of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount
equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such
Lower-Tier Regular Interest and interest thereon,
provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed
first in respect of any such interest and then in
respect of any such unreimbursed Realized Loss;
(xviii) Eighteenth, to the Class ___ Interest, in respect
of interest, (A) the Interest Distribution Amount
therefor and (B) the aggregate unpaid Interest
Shortfalls allocated to the Class ___ Interest on
any prior Distribution Date;
(xix) Nineteenth, after the Certificate Balance of the
Class ___ Interest has been reduced to zero, to the
Class ___ Interest, in reduction of the Certificate
Balance thereof, the Pooled Principal Distribution
Amount less the portion thereof distributed on such
Distribution Date pursuant to any preceding
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clause, until the Certificate Balance of the Class
___ Interest is reduced to zero;
(xx) Twentieth, to the Class ___ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ___% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the
date on which interest was last paid) to, but not
including, the Distribution Date following the
Remittance Date on which distributions in respect
of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount
equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such
Lower-Tier Regular Interest and interest thereon,
provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed
first in respect of any such interest and then in
respect of any such unreimbursed Realized Loss;
(xxi) Twenty-First, to the Class ___ Interest, in respect
of interest, (A) the Interest Distribution Amount
therefor and (B) the aggregate unpaid Interest
Shortfalls allocated to the Class ___ Interest on
any prior Distribution Date;
(xxii) Twenty-Second, after the Certificate Balance of the
Class ___ Interest has been reduced to zero, to the
Class ___ Interest, in reduction of the Certificate
Balance thereof, the Pooled Principal Distribution
Amount less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause,
until the Certificate Balance of the Class ___
Interest is reduced to zero;
(xxiii) Twenty-Third, to the Class ___ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ___% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the
date on which interest was last paid) to, but not
including, the Distribution Date following the
Remittance Date on which distributions in respect
of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount
equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such
Lower-Tier Regular Interest and interest thereon,
provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed
first in respect of any such interest and then in
respect of any such unreimbursed Realized Loss;
(xxiv) Twenty-Fourth, to the Class ___ Interest, in
respect of interest, (A) the Interest Distribution
Amount therefor and (B) the aggregate unpaid
Interest Shortfalls allocated to the Class ___
Interest on any prior Distribution Date;
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(xxv) Twenty-Fifth, after the Certificate Balance of the
Class ___ Interest has been reduced to zero, to the
Class ___ Interest, in reduction of the Certificate
Balance thereof, the Pooled Principal Distribution
Amount less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause,
until the Certificate Balance of the Class ___
Interest is reduced to zero;
(xxvi) Twenty-Sixth, to the Class __ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ___% per annum from the date on which such
unreimbursed Realized Loss was allocated (or the
date on which interest was last paid) to, but not
including, the Distribution Date following the
Remittance Date on which distributions in respect
of such unreimbursed Realized Loss are made
pursuant to this subparagraph, up to an amount
equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such
Lower-Tier Regular Interest and interest thereon,
provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed
first in respect of any such interest and then in
respect of any such unreimbursed Realized Loss;
(xxvii) Twenty-Seventh, to the Class ___ Interest, in
respect of interest, (A) the Interest Distribution
Amount therefor and (B) the aggregate unpaid
Interest Shortfalls allocated to the Class ___
Interest on any prior Distribution Date;
(xxviii) Twenty-Eighth, after the Certificate Balance of the
Class ___ Interest has been reduced to zero, to the
Class ___ Interest, in reduction of the Certificate
Balance thereof, the Pooled Principal Distribution
Amount less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause,
until the Certificate Balance of the Class ___
Interest is reduced to zero;
(xxix) Twenty-Ninth, if such Remittance Date occurs after
the EC Maturity Date, to (i)the Class _______
Interest, (ii) the Class ______ Interest, (iii) the
Class ___________ Interest, (iv) the Class ________
Interest, (v) the Class ________ Interest, (vi) the
Class _________ Interest, (vii) the Class
__________ Interest, (viii) the Class _______
Interest, (ix) the Class _________ Interest, and
(x) the Class ________ Interest, in that order, in
reduction of the Certificate Balance of each
thereof, any remaining portion of Pooled Available
Funds in the Collection Account, until the
Certificate Balance of each has been reduced to
zero; and
(xxx) Thirtieth, to the Class _________ Interest, for the
unreimbursed amounts of Realized Losses, if any,
together with simple interest thereon at a rate
equal to ___________ % per annum from the date on
which such unreimbursed Realized Loss was allocated
(or the date on which interest was last paid)
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to, but not including, the Distribution Date
following the Remittance Date on which distributions
in respect of such unreimbursed Realized Loss are
made pursuant to this subparagraph, up to an amount
equal to the aggregate of such unreimbursed
Realized Losses previously allocated to such
Lower-Tier Regular Interests and interest thereon,
provided that any distribution pursuant to this
subparagraph shall be deemed to be distributed
first in respect of any such interest and then in
respect of any such unreimbursed Realized Loss; and
(xxxi) Thirty-First, to the Class _______ Certificates,
any Pooled Available Funds remaining in the
Collection Account.
(II) On each Remittance Date, the Trustee shall receive for
deposit into the Distribution Account in respect of each Lower-Tier Regular
Interest, distributions from amounts on deposit in the Collection Account in
respect of Prepayment Premiums, if any, distributable to its Related
Certificate (or (i) in the case of the Class __________ Interest, amounts
distributable to the Class __________ Certificates and (ii) in the case of the
Class _____________ Interest, amounts distributable to the Class __________
Certificates) pursuant to Section .
(b) (I) On each Distribution Date, to the extent of amounts
remitted to the Distribution Account pursuant to Section ___________, Holders
of each Class of Certificates (other than the Class ___________ Certificates)
shall receive distributions from amounts on deposit in the Distribution
Account, up to the Pooled Available Funds for such Distribution Date, in the
amounts and in the order of priority set forth below:
(i) First, to the Class _______ Certificates,
Class Certificates and Class ________
Certificates, pro rata in accordance with
the Class Interest Distribution Amount of
each, up to an amount equal to the Class
Interest Distribution Amount of each such
Class for such Distribution Date;
(ii) Second, to the Class ________ Certificates,
Class __________ Certificates and
Class __________ Certificates, pro rata
in accordance with the Class Interest
Shortfall of each, up to an amount equal
to the aggregate unpaid Class Interest
Shortfalls previously allocated to such
Class on any previous Distribution Dates
and not paid;
(iii) Third, to the Class ________ Certificates,
in reduction of the Certificate Balance
thereof, the Pooled Principal Distribution
Amount for such Distribution Date, until
the Certificate Balance thereof is reduced
to zero;
(iv) Fourth, after the Certificate Balance of
the Class __________ Certificates has been
reduced to zero, to the Class _________
Certificates, in reduction of the
Certificate Balance thereof, the
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Pooled Principal Distribution Amount for
such Distribution Date, until the
Certificate Balance thereof is reduced to
zero;
(v) Fifth, to the Class ________ Certificates
and the Class _______ Certificates, pro
rata, for the unreimbursed amounts of
Realized Losses, if any, together with
simple interest thereon at a rate equal to
_________ % per annum from the date on
which such unreimbursed Realized Loss was
allocated (or the date on which interest
was last paid) to, but not including, the
Distribution Date on which distributions
in respect of such unreimbursed Realized
Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized
Losses previously allocated to the Class
_________ Certificates and the Class
_________ Class Certificates and interest
thereon, provided that any distribution
pursuant to this subparagraph shall be
deemed to be distributed first in respect
of any such interest and then in respect
of any such unreimbursed Realized Loss;
(vi) Sixth, to the Class __________
Certificates, up to an amount equal to the
Class Interest Distribution Amount of such
Class for such Distribution Date;
(vii) Seventh, to the Class __________
Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls
previously allocated to such Class on any
previous Distribution Dates and not paid;
(viii) Eighth, after the Certificate Balance of
the Class ____ Certificates has been
reduced to zero, to the Class ________
Certificates, in reduction of the
Certificate Balance thereof, the Pooled
Principal Distribution Amount for such
Distribution Date less the portion thereof
distributed on such Distribution Date
pursuant to any preceding clause, until
the Certificate Balance thereof is reduced
to zero;
(ix) Ninth, to the Class _____ Certificates,
for the unreimbursed amounts of Realized
Losses, if any, together with simple
interest thereon at a rate equal to ___%
per annum from the date on which such
unreimbursed Realized Loss was allocated
(or the date on which interest was last
paid) to, but not including, the
Distribution Date on which distributions
in respect of such unreimbursed Realized
Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized
Losses previously allocated to the Class
_______ Certificates and interest thereon,
provided that any distribution pursuant to
this subparagraph shall be deemed to be
distributed first in respect of
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any such interest and then in respect of
any such unreimbursed Realized Loss;
(x) Tenth, to the Class _______ Certificates,
up to an amount equal to the Class
Interest Distribution Amount of such Class
for such Distribution Date;
(xi) Eleventh, to the Class _______
Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls
previously allocated to such Class on any
previous Distribution Dates and not paid;
(xii) Twelfth, after the Certificate Balance of
the Class _______ Certificates has been
reduced to zero, to the Class __________
Certificates, in reduction of the
Certificate Balance thereof, the Pooled
Principal Distribution Amount for such
Distribution Date less the portion thereof
distributed on such Distribution Date
pursuant to any preceding clause, until
the Certificate Balance thereof is reduced
to zero;
(xiii) Thirteenth, to the Class ___ Certificates,
for the unreimbursed amounts of Realized
Losses, if any, together with simple
interest thereon at a rate equal to ____%
per annum from the date on which such
unreimbursed Realized Loss was allocated
(or the date on which interest was last
paid) to, but not including, the
Distribution Date on which distributions
in respect of such unreimbursed Realized
Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized
Losses previously allocated to the Class
____ Certificates and interest thereon,
provided that any distribution pursuant to
this subparagraph shall be deemed to be
distributed first in respect of any such
interest and then in respect of any such
unreimbursed Realized Loss;
(xiv) Fourteenth, to the Class _______
Certificates, up to an amount equal to the
Class Interest Distribution Amount of such
Class for such Distribution Date;
(xv) Fifteenth, to the Class _______
Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls
previously allocated to such Class on any
previous Distribution Dates and not paid;
(xvi) Sixteenth, after the Certificate Balance
of the Class ______ Certificates has been
reduced to zero, to the Class _____
Certificates, in reduction of the
Certificate Balance thereof, the Pooled
Principal Distribution Amount for such
Distribution Date less the portion thereof
distributed on such Distribution Date
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pursuant to any preceding clause, until
the Certificate Balance thereof is reduced
to zero;
(xvii) Seventeenth, to the Class _______
Certificates, for the unreimbursed amounts
of Realized Losses, if any, together with
simple interest thereon at a rate equal to
___% per annum from the date on which such
unreimbursed Realized Loss was allocated
(or the date on which interest was last
paid) to, but not including, the
Distribution Date on which distributions
in respect of such unreimbursed Realized
Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized
Losses previously allocated to the Class
______ Certificates and interest thereon,
provided that any distribution pursuant to
this subparagraph shall be deemed to be
distributed first in respect of any such
interest and then in respect of any such
unreimbursed Realized Loss;
(xviii) Eighteenth, to the Class _______
Certificates, up to an amount equal to the
Class Interest Distribution Amount of such
Class for such Distribution Date;
(xix) Nineteenth, to the Class _______
Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls
previously allocated to such Class on any
previous Distribution Dates and not paid;
(xx) Twentieth, after the Certificate Balance
of the Class _______ Certificates has been
reduced to zero, to the Class ________
Certificates, in reduction of the
Certificate Balance thereof, the Pooled
Principal Distribution Amount for such
Distribution Date less the portion thereof
distributed on such Distribution Date
pursuant to any preceding clause, until
the Certificate Balance thereof is reduced
to zero;
(xxi) Twenty-First, to the Class _____
Certificates, for the unreimbursed amounts
of Realized Losses, if any, together with
simple interest thereon at a rate equal to
____% per annum from the date on which
such unreimbursed Realized Loss was
allocated (or the date on which interest
was last paid) to, but not including, the
Distribution Date on which distributions
in respect of such unreimbursed Realized
Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized
Losses previously allocated to the Class
_______ Certificates and interest thereon,
provided that any distribution pursuant to
this subparagraph shall be deemed to be
distributed
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first in respect of any such interest and
then in respect of any such unreimbursed
Realized Loss;
(xxii) Twenty-Second, to the Class ______
Certificates, up to an amount equal to the
Class Interest Distribution Amount of such
Class for such Distribution Date;
(xxiii) Twenty-Third, to the Class ________
Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls
previously allocated to such Class on any
previous Distribution Dates and not paid;
(xxiv) Twenty-Fourth, after the Certificate
Balance of the Class __ Certificates has
been reduced to zero, to the Class __
Certificates, in reduction of the
Certificate Balance thereof, the Pooled
Principal Distribution Amount for such
Distribution Date less the portion thereof
distributed on such Distribution Date
pursuant to any preceding clause, until
the Certificate Balance thereof is reduced
to zero;
(xxv) Twenty-Fifth, to the Class _______
Certificates, for the unreimbursed amounts
of Realized Losses, if any, together with
simple interest thereon at a rate equal to
_________ % per annum from the date on
which such unreimbursed Realized Loss was
allocated (or the date on which interest
was last paid) to, but not including, the
Distribution Date on which distributions
in respect of such unreimbursed Realized
Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized
Losses previously allocated to the Class
_______ Certificates and interest thereon,
provided that any distribution pursuant to
this subparagraph shall be deemed to be
distributed first in respect of any such
interest and then in respect of any such
unreimbursed Realized Loss;
(xxvi) Twenty-Sixth, to the Class _______
Certificates, up to an amount equal to the
Class Interest Distribution Amount of such
Class for such Distribution Date;
(xxvii) Twenty-Seventh, to the Class __________
Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls
previously allocated to such Class on any
previous Distribution Dates and not paid;
(xxviii) Twenty-Eighth, after the Certificate
Balance of the Class ______ Certificates
has been reduced to zero, to the Class
_________ Certificates, in reduction of
the Certificate Balance thereof, the
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Pooled Principal Distribution Amount for
such Distribution Date less the portion
thereof distributed on such Distribution
Date pursuant to any preceding clause,
until the Certificate Balance thereof is
reduced to zero;
(xxix) Twenty-Ninth, to the Class ____
Certificates, for the unreimbursed amounts
of Realized Losses, if any, together with
simple interest thereon at a rate equal to
___% per annum from the date on which such
unreimbursed Realized Loss was allocated
(or the date on which interest was last
paid) to, but not including, the
Distribution Date on which distributions
in respect of such unreimbursed Realized
Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized
Losses previously allocated to the Class
______ Certificates and interest thereon,
provided that any distribution pursuant to
this subparagraph shall be deemed to be
distributed first in respect of any such
interest and then in respect of any such
unreimbursed Realized Loss;
(xxx) Thirtieth, to the Class ____ Certificates,
up to an amount equal to the Class
Interest Distribution Amount of such Class
for such Distribution Date;
(xxxi) Thirty-First, to the Class ______
Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls
previously allocated to such Class on any
previous Distribution Dates and not paid;
(xxxii) Thirty-Second, after the Certificate
Balance of the Class ____ Certificates has
been reduced to zero, to the Class ______
Certificates, in reduction of the
Certificate Balance thereof, the Pooled
Principal Distribution Amount for such
Distribution Date less the portion thereof
distributed on such Distribution Date
pursuant to any preceding clause, until
the Certificate Balance thereof is reduced
to zero;
(xxxiii) Thirty-Third, to the Class ____
Certificates, for the unreimbursed amounts
of Realized Losses, if any, together with
simple interest thereon at a rate equal to
___% per annum from the date on which such
unreimbursed Realized Loss was allocated
(or the date on which interest was last
paid) to, but not including, the
Distribution Date on which distributions
in respect of such unreimbursed Realized
Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized
Losses previously allocated to the Class
___________ Certificates and interest
thereon, provided that
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any distribution pursuant to this
subparagraph shall be deemed to be
distributed first in respect of any such
interest and then in respect of any such
unreimbursed Realized Loss;
(xxxiv) Thirty-Fourth, to the Class ______
Certificates, up to an amount equal to the
Class Interest Distribution Amount of such
Class for such Distribution Date;
(xxxv) Thirty-Fifth, to the Class _______
Certificates, up to an amount equal to the
aggregate unpaid Class Interest Shortfalls
previously allocated to such Class on any
previous Distribution Dates and not paid;
(xxxvi) Thirty-Sixth, after the Certificate
Balance of the Class Certificates has been
reduced to zero, to the Class
Certificates, in reduction of the
Certificate Balance thereof, the Pooled
Principal Distribution Amount for such
Distribution Date less the portion thereof
distributed on such Distribution Date
pursuant to any preceding clause, until
the Certificate Balance thereof is reduced
to zero;
(xxxvii) Thirty-Seventh, if such Distribution Date
occurs after the EC Maturity Date, to (i)
the Class ______ Certificates, (ii) the
Class _________ Certificates, (iii) the
Class ______ Certificates, (iv) the Class
______ Certificates, (v) the Class
________ Certificates, (vi) the Class
_________ Certificates, (vii) the Class
_________ Certificates, (viii) the Class
______________ Certificates and the Class
_______ Certificates, pro rata, and (x)
the Class _________ Certificates, in that
order, in reduction of the Certificate
Balance of each thereof, any remaining
portion of Pooled Available Funds in the
Distribution Account, until the
Certificate Balance of each has been
reduced to zero; and
(xxxviii) Thirty-Eighth, to the Class ____
Certificates, for the unreimbursed amounts
of Realized Losses, if any, together with
simple interest thereon at a rate equal to
___% per annum from the date on which such
unreimbursed Realized Loss was allocated
(or the date on which interest was last
paid) to, but not including, the
Distribution Date on which distributions
in respect of such unreimbursed Realized
Loss are made pursuant to this
subparagraph, up to an amount equal to the
aggregate of such unreimbursed Realized
Losses previously allocated to the Class
___ Certificates and interest thereon,
provided that any distribution pursuant to
this subparagraph shall be deemed to be
distributed first in respect of any such
interest and then in respect of any such
unreimbursed Realized Loss.
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All references to pro rata in the preceding clauses shall mean pro rata based
on the amount distributable pursuant to such clause.
Notwithstanding anything to the contrary in this Agreement,
on each Distribution Date prior to the earlier of (i) the Senior Principal
Distribution Cross-Over Date and (ii) the final Distribution Date in
connection with the termination of the Trust Fund, all distributions of
principal to the Class ______ Certificates and the Class _____ Certificates
will be paid, first, to holders of the Class _____ Certificates until the
Certificate Balance of such Certificates is reduced to zero, and thereafter,
to holders of the Class ______ Certificates, until the Certificate Balance of
such Certificates is reduced to zero. On each Distribution Date on and after
the Senior Principal Distribution Cross-Over Date, and in any event on the
final Distribution Date in connection with the termination of the Trust Fund,
distributions of principal on the Class ______ Certificates and the Class
_____ Certificates will be paid to holders of such two Class of Certificates,
pro rata in accordance with their respective Certificate Balances outstanding
immediately prior to such Distribution Date, until the Certificate Balance of
each such Class of Certificates is reduced to zero.
(II) On each Distribution Date, amounts remaining in the
Distribution Account following the distributions to the Certificates pursuant
to Section 4.1(b) and (c) shall be distributed to the Class _______
Certificates.
(c) On each Distribution Date, following the distribution
from the Collection Account to the Distribution Account pursuant to Section
4.1(a)(II), the Paying Agent shall make distributions of Prepayment Premiums
with respect to any Principal Prepayments received in the related Collection
Period from amounts deposited in the Distribution Account pursuant to Section
4.6(b)(i) as follows:
(I) On each Distribution Date up to and including the EC
Maturity Date, Prepayment Premiums received with respect to Yield Maintenance
Loans during the Yield Maintenance Period for such Yield Maintenance Loans,
shall be distributed to the Holders of the Certificates outstanding on such
Distribution Date, in the following amounts and order of priority:
(i) First, to the Class of Certificates which is
entitled to distributions in respect of principal on such
Distribution Date (other than pursuant to clause thirty-seventh of
Section 4.1(b)(I)), an amount equal to (A) the present value
(discounted at the Discount Rate) of the principal and interest
distributions that would have been paid in respect of such Class of
Certificates from the Distribution Date occurring in the following
month until the Certificate Balance of such Class of Certificates
would have been reduced to zero had the related prepayment not
occurred (and assuming no other prepayments were made), less (B) the
present value (discounted at the Discount Rate) of the principal and
interest distributions that will be paid in respect of such Class of
Certificates from the Distribution Date occurring in the following
month until the Certificate Balance of such Class of Certificates is
reduced to zero following such prepayment (assuming no further
prepayments are made and no delinquencies or defaults occur) less (C)
the amount of such prepayment; provided that if more than one Class
of
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Certificates is entitled to distributions in respect of principal
on such Distribution Date (other than pursuant to clause thirty-seventh
of Section 4.1(b)(I)), the amount set forth herein shall be calculated
for each such Class, and the amount of Prepayment Premiums shall be
allocated among such Classes, pro rata in accordance with the amounts
so calculated, up to an amount equal to the sum of such amounts so
calculated; and
(ii) Second, any remaining Prepayment Premiums
following the distribution in clause First above, to the Class ______
Certificates.
(II) With respect to each Distribution Date up to and
including the EC Maturity Date, any Prepayment Premiums received with respect
to any Mortgage Loan that is not a Yield Maintenance Loan and any Prepayment
Premiums received with respect to any Yield Maintenance Loan after the related
Yield Maintenance Period will be allocated solely to the Class ________
Certificates.
(III) The Servicer will be entitled to receive as additional
Servicing Compensation amount of any Prepayment Premiums received in any
Collection Period subsequent to the Collection Period related to the EC
Maturity Date.
(IV) Notwithstanding the foregoing, Prepayment Premiums
shall be distributed on any Distribution Date only to the extent they are
received in respect of the Mortgage Loans in the related Collection Period.
(d) The Certificate Balances of the Lower-Tier Regular
Interests will be reduced without distribution on any Distribution Date as a
write-off to the extent of any Realized Losses with respect to such date. Any
such write-offs will be applied to the Lower Tier Regular Interests: first, to
the Class Interest; second, to the Class ________ Interest; third, to the
Class ________ Interest; fourth, to the Class _________ Interest; fifth, to
the Class ___________ Interest; sixth, to the Class __________ Interest;
seventh, to the Class _______ Interest; eighth, to the Class _______ Interest;
and ninth, to the Class _______ Interest and the Class _______ Interest,
pro rata.
The Certificate Balances of the Certificates (other than the Class ______ ,
Class _______ , Class _____ and Class _______ Certificates) will be reduced
without distribution on any Distribution Date, as a write-off, to the extent
that, after allocation of Realized Losses in accordance with the preceding
sentence, the Certificate Balance of any Class of Certificates exceeds the
Certificate Balance of its Related Lower-Tier Regular Interest.
(e) All amounts distributable to a Class of Certificates
pursuant to this Section 4.1 on each Distribution Date shall be allocated pro
rata among the outstanding Certificates in each such Class based on their
respective Percentage Interests. Such distributions shall be made on each
Distribution Date other than the Termination Date to each Certificateholder of
record on the related Record Date by check mailed by first class mail to the
address set forth therefor in the Certificate Register or, provided that such
Certificateholder holds Certificates with an aggregate initial Certificate
Balance, Class ________ Notional Balance or Class _________ Notional Balance
in excess of $________, and shall have provided the Paying Agent with wire
instructions in writing at least ____ Business Days prior to the related
Record Date, by wire
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transfer of immediately available funds to the account of such
Certificateholder at a bank or other entity located in the United States and
having appropriate facilities therefor. The final distribution on each
Certificate shall be made in like manner, but only upon presentment and
surrender of such Certificate at the office of the Trustee or its agent (which
may be the Paying Agent or the Certificate Registrar acting as such agent)
maintained in the Borough of Manhattan that is specified in the notice to
Certificateholders of such final distribution.
(f) Except as otherwise provided in Section 9.1 with respect
to an Anticipated Termination Date, the Trustee shall, no later than the
__________ day of the month in the month preceding the Distribution Date on
which the final distribution with respect to any Class of Certificates is
expected to be made or such later day as the Trustee becomes aware that the
final distribution with respect to any Class of Certificates is expected to be
made on the succeeding Distribution Date, mail to each Holder of such Class of
Certificates, on such day a notice to the effect that:
(A) the Trustee reasonably expects, based upon
information previously provided to it, that the
final distribution with respect to such Class of
Certificates will be made on such Distribution
Date, but only upon presentation and surrender of
such Certificates at the office of the Trustee
therein specified; and
(B) if such final distribution is made on such
Distribution Date, no interest shall accrue on such
Certificates from and after such Distribution Date;
provided, however, that the Class ____ and Class _______ Certificates shall
remain outstanding until there is no other Class of Certificates or Lower-Tier
Regular Interests outstanding.
Any funds not distributed to any Holder or Holders of
Certificates of such Class on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates shall, on such
Distribution Date, be set aside and held in trust for the benefit of the
appropriate non-tendering Holder or Holders. If any Certificates as to which
notice has been given pursuant to this Section 4.1(f) shall not have been
surrendered for cancellation within ___ months after the time specified in
such notice, the Trustee shall mail a second notice to the remaining
non-tendering Certificateholders, at their last addresses shown in the
Certificate Register, to surrender their Certificates for cancellation in
order to receive from such funds held the final distribution with respect
thereto. If, within one year after the second notice, any of such Certificates
shall not have been surrendered for cancellation, the Trustee may, directly or
through an agent, take appropriate steps to contact the remaining nontendering
Certificateholders concerning surrender of their Certificates. The costs and
expenses of maintaining such funds in trust and of contacting such
Certificateholders shall be paid out of such funds. If, within two years after
the second notice, any such Certificates shall not have been surrendered for
cancellation, the Paying Agent shall pay to the Trustee all amounts
distributable to the Holders thereof, and the Trustee shall thereafter hold
such amounts for the benefit of such Holders until the earlier of (i) its
termination as Trustee hereunder and the transfer of such amounts to a
successor Trustee and (ii) the termination of the Trust Fund and distribution
of such amounts to the Class __ Certificateholders. No interest shall accrue
or be payable to any
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Certificateholder on any amount held in trust hereunder or by the Trustee as a
result of such Certificateholder's failure to surrender its Certificate(s) for
final payment thereof in accordance with this Section 4.1(f). Any such amounts
transferred to the Trustee may be invested in Permitted Investments and all
income and gain realized from investment of such funds shall be for the
benefit of the Trustee. In the event the Trustee is permitted or required to
invest any amounts in Permitted Investments under this Agreement, whether in
its capacity as Trustee or in the event of its assumption of the duties of, or
becoming the successor to, the Servicer in accordance with the terms of this
Agreement, it shall invest such amounts in the following Permitted Investments
and priority, in each case only for so long as any such investment shall
continue to be a Permitted Investment: (1) (2) , (3) and (4) if none of
(1)-(3) above are available, Permitted Investments under clause (i) of the
definition of Permitted Investments. The Trustee shall indemnify the related
Certificateholders against any loss incurred in respect of any such Permitted
Investment immediately upon realization of such loss.
(g) Notwithstanding any provision in this Agreement to the
contrary, the aggregate amount distributable to each Class pursuant to this
Section 4.1 shall be reduced by the aggregate amount paid to any Person
pursuant to Section 6.3 or Section 8.5(d), such reduction to be allocated
among such Classes pro rata, based upon the respective amounts so
distributable without taking into account the provision of this Section
4.1(g). Such reduction of amounts otherwise distributable to a Class shall be
allocated first in respect of interest and second in respect of principal. For
purposes of determining Interest Shortfalls and Certificate Balances, the
amount of any such reduction so allocated to a Class shall be deemed to have
been distributed to such Class.
SECTION 4.2. Statements to Rating Agencies and
Certificateholders; Available Information;
Information Furnished to Financial Market
Publisher.
(a) On each Distribution Date, the Trustee shall prepare and
forward by mail to each Rating Agency and each Holder of a Certificate, with
copies to the Depositor, Paying Agent, Servicer and Special Servicer, a
statement as to such distribution setting forth for each Class, as applicable:
(i) Principal Distribution Amount and the amount
allocable to principal included in Pooled Available
Funds;
(ii) The Class Interest Distribution Amount
distributable to such Class and the amount of
Pooled Available Funds allocable thereto, together
with any Class Interest Shortfall allocable to such
Class;
(iii) The amount of any P&I Advances by the Servicer, the
Trustee or the Fiscal Agent included in the amounts
distributed to such Certificateholder;
(iv) The Certificate Balance of each Class of
Certificates after giving effect to the
distribution of amounts in respect of the Pooled
Principal Distribution Amount on such Distribution
Date;
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(v) Realized Losses and their allocation to the
Certificate Balance of any Class of Certificates;
(vi) The Scheduled Principal Balance of the Mortgage
Loans as of the Due Date preceding such
Distribution Date;
(vii) The number and aggregate principal balance of
Mortgage Loans (A) delinquent ____ month, (B)
delinquent ___ months, (C) delinquent _____ or more
months, (D) as to which foreclosure proceedings
have been commenced and (E) that otherwise
constitute Specially Serviced Mortgage Loans, and,
with respect to each Specially Serviced Mortgage
Loan, the amount of Property Advances made during
the related Collection Period, the amount of the
P&I Advance made on such Distribution Date, the
aggregate amount of Property Advances theretofore
made that remain unreimbursed and the aggregate
amount of P&I Advances theretofore made that remain
unreimbursed;
(viii) With respect to any Mortgage Loan that became an
REO Mortgage Loan during the preceding calendar
month, the principal balance of such Mortgage Loan
as of the date it became an REO Mortgage Loan;
(ix) As of the Due Date preceding such Distribution
Date, as to any REO Property sold during the
related Collection Period, the date on which the
Special Servicer made a Final Recovery
Determination and the amount of the proceeds of
such sale deposited into the Collection Account,
and the aggregate amount of REO Proceeds and Net
REO Proceeds (in each case other than Liquidation
Proceeds) and other revenues collected by the
Special Servicer with respect to each REO Property
during the related Collection Period and credited
to the Collection Account, in each case identifying
such REO Property by name;
(x) The outstanding principal balance of each REO
Mortgage Loan as of the close of business on the
immediately preceding Due Date and the appraised
value of the related REO Property per the most
recent Updated Appraisal obtained;
(xi) The amount of the Servicing Compensation paid to
the Servicer with respect to such Distribution
Date, and the amount of the additional servicing
compensation described in Section 3.12(a) that was
paid to the Servicer with respect to such
Distribution Date;
(xii) The amount of any Special Servicing Fee or
Disposition Fee paid to the Special Servicer with
respect to such Distribution Date; and
(xiii) (A) The amount of Prepayment Premiums, if any,
received during the related Collection Period, and
(B) the amount of Default Interest received
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during the related Collection Period and the Net
Default Interest for such Distribution Date.
In the case of information furnished pursuant to subclauses
(i), (ii), (iii) and (xiii)(A) above, the amounts shall be expressed as a
dollar amount in the aggregate for all Certificates of each applicable Class
and for each Class of Certificates for a denomination of $______ initial
Certificate Balance or Notional Balance.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Certificate (except for a Class or Class
Certificate) and to each Rating Agency a statement containing the information
set forth in subclauses (i) and (ii) above, aggregated for such calendar year
or applicable portion thereof during which such Person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that it provided substantially comparable information
pursuant to any requirements of the Code as from time to time in force.
On each Distribution Date, the Trustee shall forward to each
Holder of a Class ____ or Class _____ Certificate a copy of the reports
forwarded to the other Certificateholders on such Distribution Date and a
statement setting forth the amounts, if any, actually distributed with respect
to the Class ______ or Class Certificates ______ on such Distribution Date.
Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Class _____ or Class ______ Certificate a
statement containing the information provided pursuant to the previous
paragraph aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the
Trustee shall be deemed to have been satisfied to the extent that it provided
substantially comparable information pursuant to any requirements of the Code
as from time to time in force.
In addition to the reports required to be delivered pursuant
to this Section 4.2(a), the Trustee shall make available upon request to each
proposed transferee of a Privately Placed Certificate such additional
information, if any, in its possession as may be required to permit the
proposed transfer to be effected pursuant to Rule 144A.
(b) On or within ___ Business Days following each
Distribution Date, the Trustee shall prepare and furnish to the Financial
Market Publisher and the Placement Agent, using the format and media mutually
agreed upon by the Trustee, the Financial Market Publisher and the Placement
Agent, the following information regarding each Mortgage Loan and any other
information reasonably requested by the Placement Agent and available to the
Trustee:
(i) an identifying loan number;
(ii) the Mortgage Rate; and
(iii) the principal balance as of such Distribution Date.
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The Trustee shall only be obligated to deliver the statements, reports and
information contemplated by Section 4.2(a) and 4.2(b) to the extent it
receives the necessary underlying information from the Servicer and shall not
be liable for any failure to deliver any thereof on the prescribed Due Dates,
to the extent such failure is caused by the Servicer's failure to deliver such
underlying information in a timely manner. Nothing herein shall obligate the
Trustee, the Servicer or the Special Servicer to violate (in the reasonable
judgment of the Servicer, the Special Servicer or the Trustee, as appropriate)
any applicable law or provision of any Mortgage Loan document prohibiting
disclosure of information with respect to any Borrower and the failure of the
Trustee, the Servicer or the Special Servicer to disseminate information for
such reason shall not be a breach hereof.
SECTION 4.3. Compliance with Withholding Requirements.
Notwithstanding any other provision of this Agreement, the
Paying Agent shall comply with all federal withholding requirements with
respect to payments to Certificateholders of interest or original issue
discount that the Paying Agent reasonably believes are applicable under the
Code. The consent of Certificateholders shall not be required for any such
withholding. The Paying Agent agrees that it will not withhold with respect to
payments of interest or original issue discount in the case of a
Certificateholder that is a non-U.S. Person that has furnished or caused to be
furnished (i) an effective Form W-8 or Form W-9 or an acceptable substitute
form or a successor form and who has informed the Trustee in writing that it
is not a "10-percent shareholder" within the meaning of Code Section
871(h)(3)(B) or a "controlled foreign corporation" described in Code Section
881(c)(3)(C) with respect to the Trust Fund or the Depositor, or (ii) an
effective Form 4224 or an acceptable substitute form or a successor form. In
the event the Paying Agent or its agent withholds any amount from interest or
original issue discount payments or advances thereof to any Certificateholder
pursuant to federal withholding requirements, the Paying Agent shall indicate
the amount withheld to such Certificateholder. Any amount so withheld shall be
treated as having been distributed to such Certificateholder for all purposes
of this Agreement.
SECTION 4.4. REMIC Compliance.
(a) The parties intend that each of the Upper-Tier REMIC and
the Lower- Tier REMIC shall constitute, and that the affairs of each of the
Upper-Tier REMIC and the Lower-Tier REMIC shall be conducted so as to qualify
it as, a "real estate mortgage investment conduit" as defined in, and in
accordance with, the REMIC Provisions, and the provisions hereof shall be
interpreted consistently with this intention. In furtherance of such
intention, the Trustee shall, to the extent permitted by applicable law, act
as agent, and is hereby appointed to act as agent, of each of the Upper-Tier
REMIC and the Lower-Tier REMIC and shall on behalf of each of the Upper-Tier
REMIC and the Lower-Tier REMIC: (i) prepare, sign and file, or cause to be
prepared and filed, all required Tax Returns for each of the Upper-Tier REMIC
and the Lower-Tier REMIC, using a calendar year as the taxable year for each
of the Upper-Tier REMIC and the Lower-Tier REMIC, when and as required by the
REMIC Provisions and other applicable federal, state or local income tax laws;
(ii) make an election, on behalf of each of the Upper-Tier REMIC and the
Lower-Tier REMIC, to be treated as a REMIC on Form 1066 for its first taxable
year, in accordance with the REMIC Provisions; (iii) prepare
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and forward, or cause to be prepared and forwarded, to the Certificateholders
and the Internal Revenue Service and applicable state and local tax
authorities all information reports as and when required to be provided to
them in accordance with the REMIC Provisions; (iv) if the filing or
distribution of any documents of an administrative nature not addressed in
clauses (i) through (iii) of this Section 4.4 is then required by the REMIC
Provisions in order to maintain the status of the Upper-Tier REMIC or the
Lower-Tier REMIC as a REMIC or is otherwise required by the Code, prepare,
sign and file or distribute, or cause to be prepared and signed and filed or
distributed, such documents with or to such Persons when and as required by
the REMIC Provisions or the Code or comparable provisions of state and local
law; (v) within _____ days of the Closing Date, furnish or cause to be
furnished to the Internal Revenue Service, on Form 8811 or as otherwise may be
required by the Code, the name, title and address of the Person that the
holders of the Certificates may contact for tax information relating thereto
(and the Trustee shall act as the representative of each of the Upper-Tier
REMIC and the Lower-Tier REMIC for this purpose), together with such
additional information as may be required by such Form, and shall update such
information at the time or times and in the manner required by the Code (and
the Depositor agrees within ___ Business Days of the Closing Date, to provide
any information reasonably requested by the Trustee and necessary to make such
filing); and (vi) maintain such records relating to each of the Upper-Tier
REMIC and the Lower-Tier REMIC as may be necessary to prepare the foregoing
returns, schedules, statements or information, such records, for federal
income tax purposes, to be maintained on a calendar year and on an accrual
basis. The Holder of the largest Percentage Interest in the Class _______ or
Class _______ Certificates shall be the tax matters person of the Upper-Tier
REMIC or the Lower-Tier REMIC, respectively, pursuant to Treasury Regulations
Section 1.860F-4(d). If more than one Holder should hold an equal Percentage
Interest in the Class ________ or Class _________ Certificates larger than
that held by any other Holder, the first such Holder to have acquired such
Class _______ or Class ________ Certificates shall be such tax matters person.
The Trustee shall act as attorney-in-fact and agent for the tax matters person
of each of the Upper-Tier REMIC and the Lower-Tier REMIC, and each Holder of a
Percentage Interest in the Class _______ or Class ________ Certificates, by
acceptance thereof, is deemed to have consented to the Trustee's appointment
in such capacity and agrees to execute any documents required to give effect
thereto, and any fees and expenses incurred by the Trustee in connection with
any audit or administrative or judicial proceeding shall be paid by the Trust
Fund. The Trustee shall not intentionally take any action or intentionally
omit to take any action if, in taking or omitting to take such action, the
Trustee knows that such action or omission (as the case may be) would cause
the termination of the REMIC status of the Upper-Tier REMIC or the Lower- Tier
REMIC or the imposition of tax on the Upper-Tier REMIC or the Lower-Tier REMIC
(other than a tax on income expressly permitted or contemplated to be received
by the terms of this Agreement). Notwithstanding any provision of this
paragraph to the contrary, the Trustee shall not be required to take any
action that the Trustee in good faith believes to be inconsistent with any
other provision of this Agreement, nor shall the Trustee be deemed in
violation of this paragraph if it takes any action expressly required or
authorized by any other provision of this Agreement, and the Trustee shall
have no responsibility or liability with respect to any act or omission of the
Depositor or the Servicer or the Special Servicer which causes the Trustee to
be unable to comply with any of clauses (i) through (vi) of the fifth
preceding sentence or which results in any action contemplated by clauses (i)
or (ii) of the next succeeding sentence. In this regard the Trustee shall (i)
exercise reasonable care not to allow the occurrence of any "prohibited
transactions"
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with the meaning of Code Section 860F(a), unless the party seeking such action
shall have delivered to the Trustee an Opinion of Counsel (at such party's
expense) that such occurrence would not (A) result in a taxable gain, (B)
otherwise subject the Upper-Tier REMIC or the Lower-Tier REMIC to tax (other
than a tax at the highest marginal corporate tax rate on net income from
foreclosure property), or (C) cause either the Upper-Tier REMIC or the
Lower-Tier REMIC to fail to qualify as a REMIC; and (ii) exercise reasonable
care not to allow the Trust Fund to receive income from the performance of
services or from assets not permitted under the REMIC Provisions to be held by
a REMIC (provided, however, that the receipt of any income expressly permitted
or contemplated by the terms of this Agreement shall not be deemed to violate
this clause). Neither the Servicer, the Special Servicer nor the Depositor
shall be responsible or liable (except in connection with any act or omission
referred to in the two preceding sentences) for any failure by the Trustee to
comply with the provisions of this Section 4.4. The Depositor, the Special
Servicer and the Servicer shall cooperate in a timely manner with the Trustee
in supplying any information within the Depositor's, the Special Servicer's or
the Servicer's control (other than any confidential information) that is
reasonably necessary to enable the Trustee to perform its duties under this
Section 4.4.
(b) The following assumptions are to be used for purposes of
determining the anticipated payments of principal and interest for calculating
the original yield to maturity and original issue discount with respect to the
Regular Certificates: (i) each Mortgage Loan will pay principal and interest
in accordance with its terms and scheduled payments will be timely received on
their Due Dates, provided that the Mortgage Loans in the aggregate will prepay
in accordance with the Prepayment Assumption; (ii) none of the Servicer, the
Depositor and the Class Certificateholders will exercise the right described
in Section 9.1 of this Agreement to cause early termination of the Trust Fund;
and (iii) no Mortgage Loan is repurchased by the Depositor.
SECTION 4.5. Imposition of Tax on the Trust Fund.
In the event that any tax, including interest, penalties or
assessments, additional amounts or additions to tax, is imposed on the
Upper-Tier REMIC or the Lower- Tier REMIC, such tax shall be charged against
amounts otherwise distributable to the Holders of the Certificates; provided,
that any taxes imposed on any net income from foreclosure property pursuant to
Code Section 860G(d) or any similar tax imposed by a state or local
jurisdiction shall instead be treated as an expense of the related REO
Property in determining Net REO Proceeds with respect to such REO Property
(and until such taxes are paid, the Servicer from time to time shall withdraw
from the Collection Account amounts reasonably determined by the Servicer to
be necessary to pay such taxes, which the Servicer shall maintain in a
separate, non-interest-bearing account, and the Servicer shall deposit in the
Collection Account the excess determined by the Servicer from time to time of
the amount in such account over the amount necessary to pay such taxes) and
shall be paid therefrom. Except as provided in the preceding sentence, the
Trustee is hereby authorized to and shall retain or cause to be retained from
Pooled Available Funds sufficient funds to pay or provide for the payment of,
and to actually pay, such tax as is legally owed by the Upper-Tier REMIC or
the Lower-Tier REMIC (but such authorization shall not prevent the Trustee
from contesting, at the expense of the Trust Fund, any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by
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law, pending the outcome of such proceedings). The Trustee is hereby
authorized to and shall segregate or cause to be segregated, in a separate
non-interest bearing account, (i) the net income from any "prohibited
transaction" under Code Section 860F(a) or (ii) the amount of any contribution
to the Upper-Tier REMIC or the Lower-Tier REMIC after the Startup Day that is
subject to tax under Code Section 860G(d) and use such income or amount, to
the extent necessary, to pay such tax, such amounts to be segregated from the
Collection Account with respect to any such net income of or contribution to
the Lower-Tier REMIC and from the Distribution Account with respect to any
such net income of or contribution to the Upper-Tier REMIC (and return the
balance thereof, if any, to the Collection Account or the Distribution
Account, as the case may be). To the extent that any such tax is paid to the
Internal Revenue Service, the Trustee shall retain an equal amount from future
amounts otherwise distributable to the Holders of the Class _____ or the Class
_______ Certificates as the case may be, and shall distribute such retained
amounts to the Holders of Regular Certificates or Lower-Tier Regular
Interests, as applicable, until they are fully reimbursed and then to the
Holders of the Class _____ Certificates or the Class ________ Certificates, as
applicable. Neither the Servicer, the Special Servicer nor the Trustee shall
be responsible for any taxes imposed on the Upper-Tier REMIC or the Lower-Tier
REMIC, in either case, except to the extent such tax is attributable to a
breach of a representation or warranty of the Servicer or the Special Servicer
or an act or omission of the Servicer, the Special Servicer or the Trustee in
contravention of this Agreement, provided, further, that such breach, act or
omission could result in liability under Section 6.3 in the case of the
Servicer or Special Servicer or Section 4.4 or 8.1, in the case of the
Trustee. Notwithstanding anything in this Agreement to the contrary, in each
such case, the Servicer and the Special Servicer shall not be responsible for
the Trustee's breaches, acts or omissions, and the Trustee shall not be
responsible for the breaches, acts or omissions of the Servicer or the Special
Servicer.
SECTION 4.6. Remittances; P&I Advances.
(a) For purposes of this Section 4.6, "Applicable Monthly
Payment" shall mean, for any Mortgage Loan with respect to any month, (A) if
such Mortgage Loan is delinquent as to its Balloon Payment (including any
Mortgage Loan as to which the related Mortgaged Property has become an REO
Property and for any month after the related Balloon Payment would have been
due), the related Assumed Scheduled Payment and (B) if such Mortgage Loan is
not described by the preceding clause (including any such Mortgage Loan as to
which the related Mortgaged Property has become an REO Property), the Monthly
Payment.
(b) On the Remittance Date immediately preceding each
Distribution Date, the Servicer shall:
(i) remit to the Trustee from the Collection
Account for deposit in the Distribution Account an amount
equal to the Prepayment Premiums received by the Servicer in
the Collection Period preceding such Remittance Date;
(ii) remit to the Trustee from the Collection
Account for deposit in the Distribution Account an amount
equal to the Pooled Available Funds for such Distribution
Date (excluding P&I Advances); and
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(iii) make an advance, by deposit into the
Collection Account, and remit such amount to the
Distribution Account in an amount equal to the sum of the
Applicable Monthly Payment for each Mortgage Loan, to the
extent such amounts were not received on such Mortgage Loans
as of the close of business on the Business Day immediately
preceding the Remittance Date.
(c) With respect to each Remittance Date, the Servicer shall
determine (a) with respect to each Seriously Delinquent Loan, the excess, if
any, of (x) the sum of the following amounts with respect to such Seriously
Delinquent Loan: (i) the outstanding principal balance thereof that is due and
payable; (ii) the interest portion of any unreimbursed P&I Advances with
respect thereto; (iii) any unreimbursed Property Advances with respect
thereto; and (iv) any currently due and payable or delinquent property taxes
with respect thereto over (y) the appraised value (as reflected in the related
Updated Appraisal) thereof and (b) the sum of all amounts described in clause
(a) (such sum, the "Anticipated Loss"). Notwithstanding Section 4.6(b)(iii),
with respect to any Remittance Date, the Servicer shall make a P&I Advance
with respect to any Seriously Delinquent Loan only to the extent that Pooled
Available Funds for the related Distribution Date (exclusive of any P&I
Advance with respect to any Seriously Delinquent Loans) are insufficient to
make distributions to all Classes of Lower-Tier Regular Interests and all
Classes of Certificates pursuant to Section 4.1(a)(I) and Section 4.1(b)(I),
respectively, other than, in each case, the most subordinate Class then
outstanding and any other Class as to which the aggregate of the Certificate
Balances of all Classes subordinate to such Class does not equal or exceed the
Anticipated Loss. In the event that, with respect to any Remittance Date, more
than one Mortgage Loan is a Seriously Delinquent Loan, the Servicer shall
designate on its records the specific Seriously Delinquent Loans as to which
any P&I Advance shall be deemed to have been made. Any such designation of P&I
Advances to specific Seriously Delinquent Loans shall be made, first, among
Seriously Delinquent Loans (excluding any REO Mortgage Loans) as to which the
related Borrower is delinquent only in the payment of Monthly Payments;
second, among Seriously Delinquent Loans (excluding REO Mortgage Loans) as to
which the related Borrower is delinquent in the payment of a Balloon Payment;
and third, among Seriously Delinquent Loans that are REO Mortgage Loans;
provided, however, that any such designation shall be made first to those
Seriously Delinquent Loans in respect of which the Servicer reasonably
determines that such P&I Advance is most likely to be recoverable.
(d) Any amount advanced by the Servicer pursuant to Section
4.6(b)(iii) shall constitute a P&I Advance for all purposes of this Agreement
and the Servicer shall be entitled to reimbursement thereof pursuant to
3.6(ii). The Servicer shall further be entitled to Advance Interest Amounts
accrued on the amount of any such P&I Advance at the Advance Rate and shall be
entitled to payment or reimbursement thereof pursuant to 3.6(iii).
(e) If, as of 5:00 p.m., New York City time, on any
Remittance Date the Servicer shall not (i) have made the P&I Advance required
to have been made on such date pursuant to Section 4.6(b)(iii) or (ii)
delivered the certificate and documentation related to a determination of
nonrecoverability, the Trustee shall immediately notify the Fiscal Agent by
telephone promptly confirmed in writing, and the Trustee shall no later than
10:00 a.m., New York City time, on such Distribution Date deposit into the
Distribution Account in immediately
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available funds an amount equal to the P&I Advances otherwise required to have
been made by the Servicer. If the Trustee fails to make any P&I Advance
required to be made under this Section 4.6, the Fiscal Agent shall make such
P&I Advance not later than 11:00 a.m., New York City time, on such
Distribution Date and, thereby, the Trustee shall not be in default under this
Agreement.
(f) Anything to the contrary in this Agreement
notwithstanding, none of the Servicer, the Trustee or the Fiscal Agent shall
be obligated to make a P&I Advance as to any Monthly Payment or Assumed
Scheduled Payment on any date on which a P&I Advance is otherwise required to
be made by this Section 4.6 if the Servicer, the Trustee or the Fiscal Agent,
as applicable, determines that such advance will be a Nonrecoverable Advance.
The Trustee and the Fiscal Agent shall be entitled to rely, conclusively, on
any determination by the Servicer that a P&I Advance, if made, would be a
Nonrecoverable Advance. The Trustee and the Fiscal Agent, in determining
whether or not a P&I Advance previously made is, or a proposed P&I Advance, if
made, would be, a Nonrecoverable Advance shall be subject to the standards
applicable to the Servicer hereunder.
(g) The Servicer, the Trustee or the Fiscal Agent, as
applicable, shall be entitled to, and hereby covenants and agrees to promptly
seek and effect, the reimbursement of P&I Advances it makes to the extent
permitted pursuant to Section 3.6(ii) of this Agreement together with any
related Advance Interest Amount in respect of such P&I Advances to the extent
permitted pursuant to Section 3.6(iii).
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ARTICLE V
THE CERTIFICATES
SECTION 5.1. The Certificates.
The Certificates consist of the Class Certificates,
[The Certificates of each Class will be issuable in
definitive physical form only, registered in the name of the holders thereof;
provided, however, that in accordance with Section 5.3 beneficial ownership
interests in the Certificates shall initially be represented by Book-Entry
Certificates held and transferred through the book-entry facilities of the
Securities Depository, in minimum denominations of authorized initial
Certificate Balance or notional amount (except with respect to the Class
________ and Class ______ Certificates), as described in the succeeding table.
The Book-Entry Certificates shall be in minimum denominations of $ _______ and
multiples of $ in excess thereof and the Certificates other than Book-Entry
Certificates shall be in minimum denominations of $ __________________ and
multiples of $ ______________ in excess thereof, except one Certificate of
each such Class may be issued which represents a different initial Certificate
Balance or Notional Balance to accommodate the remainder of the initial
Certificate Balance or related Notional amount. Each Certificate will share
ratably in all rights of the related Class. The Class ________ and ________
Certificates shall each be issuable in one or more registered, definitive
physical certificates in minimum denominations of __% Percentage Interests and
integral multiples of a __% Percentage Interest in excess thereof and together
aggregating the entire ___% Percentage Interest in each such Class.
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Aggregate Denominations
of all Certificates of Class
Minimum (in initial Certificate Balance or
Class Denomination initial Notional Balance)
Any of the Certificates may be issued with appropriate
insertions, omissions, substitutions and variations, and may have imprinted or
otherwise reproduced thereon such legend or legends, not inconsistent with the
provisions of this Agreement, as may be required to comply with any law or
with rules or regulations pursuant thereto, or with the rules of any
securities market in which the Certificates are admitted to trading, or to
conform to general usage.
Each Certificate may be printed or in typewritten or similar
form, and each Certificate shall, upon original issue, be executed and
authenticated by the Trustee or the Authenticating Agent and delivered to the
Depositor. All Certificates shall be executed by manual or facsimile signature
on behalf of the Trustee or Authenticating Agent by an authorized officer or
signatory. Certificates bearing the signature of an individual who was at any
time the proper officer or signatory of the Trustee or Authenticating Agent
shall bind the Trustee or Authenticating Agent, notwithstanding that such
individual has ceased to hold such office or position prior to the delivery of
such Certificates or did not hold such office or position at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication in the form set forth in Exhibits
A-1 through A-14 executed by the Authenticating Agent by manual signature, and
such certificate of authentication upon any Certificate shall be conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the
date of their authentication.
SECTION 5.2. Registration, Transfer and Exchange of
Certificates.
(a) The Trustee shall keep or cause to be kept at the
Corporate Trust Office books (the "Certificate Register") for the
registration, transfer and exchange of Certificates (the Trustee, in such
capacity, being the "Certificate Registrar"). The names and addresses of all
Certificateholders and the names and addresses of the transferees of any
Certificates shall be registered in the Certificate Register. The Person in
whose name any Certificate is so registered shall be deemed and treated as the
sole owner and Holder thereof for all purposes of this Agreement and the
Certificate Registrar, the Servicer, the Special Servicer, the Trustee, any
Paying Agent and any agent of any of them shall not be affected by any notice
or knowledge to the contrary. An Individual Certificate is transferable or
exchangeable only upon the surrender of such Certificate to the Certificate
Registrar at the Corporate Trust Office together with an assignment and
transfer (executed by the Holder or his duly authorized attorney), subject to
the
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requirements of Section 5.2(c), (d), (e) and (f). Upon request of the Trustee,
the Certificate Registrar shall provide the Trustee with the names, addresses
and Percentage Interests of the Holders.
(b) Upon surrender for registration of transfer of any
Individual Certificate, subject to the requirements of Section 5.2(c), (d),
(e) and (f), the Trustee shall execute and the Authenticating Agent shall duly
authenticate in the name of the designated transferee or transferees, one or
more new Certificates in authorized denominations of a like aggregate
Certificate Balance. Such Certificates shall be delivered by the Certificate
Registrar in accordance with Section 5.2(e). Each Certificate surrendered for
registration of transfer shall be cancelled and subsequently destroyed by the
Certificate Registrar. Each new Certificate issued pursuant to this Section
5.2 shall be registered in the name of any Person as the transferring Holder
may request, subject to the provisions of Section 5.2(c), (d), (e) and (f).
(c) The exchange, transfer and registration of transfer of
Individual Certificates that are Privately Placed Certificates shall be
subject to the restrictions set forth below (in addition to the provisions of
Section 5.2(d), (e) and (f)):
(i) The Certificate Registrar shall register the
transfer of an Individual Certificate that is a
Privately Placed Certificate if the requested
transfer is being made to a transferee who has
provided the Certificate Registrar with an
Investment Representation Letter substantially in
the form of Exhibit D-1 hereto (an "Investment
Representation Letter"), to the effect that the
transfer is being made to a Qualified Institutional
Buyer in accordance with Rule 144A; or
(ii) The Certificate Registrar shall register the
transfer of an Individual Certificate that is a
Privately Placed Certificate (other than a Class
or Class Certificate), if prior to the transfer,
the transferee furnishes to the Certificate
Registrar (1) an Investment Representation Letter
to the effect that the transfer is being made to an
Institutional Accredited Investor in accordance
with an applicable exemption under the Act, (2) an
Opinion of Counsel acceptable to the Certificate
Registrar that such transfer is in compliance with
the Act, and (3) a written undertaking by the
transferor to reimburse the Trust for any costs
incurred by it in connection with the proposed
transfer. In addition, the Certificate Registrar
may, as a condition of the registration of any such
transfer, require the transferor to furnish such
other certificates, legal opinions or other
information (at the transferor's expense) as the
Certificate Registrar may reasonably require to
confirm that the proposed transfer is being made
pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of
the Act and other applicable laws.
(d) Subject to the restrictions on transfer and exchange set
forth in this Section 5.2, the Holder of one or more Certificates may transfer
or exchange the same in whole or in part (with a Certificate Balance equal to
any authorized denomination) by surrendering such
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Certificate at the Corporate Trust Office or at the office of any transfer
agent appointed as provided under this Agreement, together with an instrument
of assignment or transfer (executed by the Holder or its duly authorized
attorney), in the case of transfer, and a written request for exchange in the
case of exchange. Subject to the restrictions on transfer set forth in this
Section 5.2, following a proper request for transfer or exchange, the
Certificate Registrar shall, within ____ Business Days of such request if made
at the Corporate Trust Office, or within ___ Business Days if made at the
office of a transfer agent (other than the Certificate Registrar), execute and
deliver at the Corporate Trust Office or at the office of such transfer agent,
as the case may be, to the transferee (in the case of transfer) or the Holder
(in the case of exchange) or send by first class mail (at the risk of the
transferee in the case of transfer or the Holder in the case of exchange) to
such address as the transferee or the Holder, as applicable, may request, an
Individual Certificate or Certificates, as the case may require, for a like
aggregate Certificate Balance and in such authorized denomination or
denominations as may be requested. The presentation for transfer or exchange
of any Individual Certificate shall not be valid unless made at the Corporate
Trust Office or at the office of a transfer agent by the registered Holder in
person, or by a duly authorized attorney-in-fact. The Certificate Registrar
may decline to accept any request for an exchange or registration of transfer
of any Certificate during the period of ___ days preceding any Distribution
Date.
(e) Individual Certificates may only be transferred to
Eligible Investors as described herein. In the event the Certificate Registrar
shall determine that an Individual Certificate is being held by or for the
benefit of a Person who is not an Eligible Investor, or that such holding is
unlawful under the laws of a relevant jurisdiction, then the Certificate
Registrar shall void such transfer, if permitted under applicable law.
(f) No fee or service charge shall be imposed by the
Certificate Registrar for its services in respect of any registration of
transfer or exchange referred to in this Section 5.2 other than for transfers
to Institutional Accredited Investors, as provided herein. In connection with
any transfer to an Institutional Accredited Investor, the transferor shall
reimburse the Trust for any costs (including the cost of the Certificate
Registrar's counsel's review of the documents and any legal opinions submitted
by the transferor or transferee to the Certificate Registrar as provided
herein) incurred by the Certificate Registrar in connection with such
transfer. The Certificate Registrar may require payment by each transferor of
a sum sufficient to cover any tax, expense or other governmental charge
payable in connection with any such transfer.
(g) Subject to Section 5.2(d), transfers of the Class _______
and Class _______ Certificates may be made only in accordance with this Section
5.2(g). The Certificate Registrar shall register the transfer of a Class
______ or Class __________ Certificate if (x) the transferor has advised the
Certificate Registrar in writing that the Certificate is being transferred to
a Qualified Institutional Buyer; and (y) prior to transfer the transferor
furnishes to the Certificate Registrar an Investment Representation Letter. In
addition, the Certificate Registrar may, as a condition of the registration of
any such transfer, require the transferor to furnish such other
certifications, legal opinions or other information (at the transferor's
expense) as they may reasonably be required to confirm that the proposed
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Act and other applicable
laws.
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(h) Neither the Depositor, the Servicer, the Special
Servicer, the Trustee nor the Certificate Registrar is obligated to register
or qualify any Class of Certificates under the Act or any other securities law
or to take any action not otherwise required under this Agreement to permit
the transfer of such Certificates without registration or qualification. Any
Certificateholder desiring to effect such transfer shall, and does hereby
agree to, indemnify the Depositor, the Servicer, the Special Servicer, the
Trustee and the Certificate Registrar, against any loss, liability or expense
that may result if the transfer is not exempt from the registration
requirements of the Act or is not made in accordance with such federal and
state laws.
(i) No transfer of any Ownership Interest in a Subordinate
Certificate shall be made to (i) an employee benefit plan subject to the
fiduciary responsibility provisions of ERISA, or Section 4975 of the Code, or
a governmental plan subject to any federal, state or local law ("Similar
Law"), which is to a material extent, similar to the foregoing provisions of
ERISA or the Code (collectively, a "Plan") or (ii) an insurance company that
is using the assets of any insurance company separate account or general
account in which the assets of any such Plan are invested (or which are deemed
pursuant to ERISA or any Similar Law to include assets of Plans) to acquire
any such Subordinate Certificates, other than using assets of its general
account in circumstances whereby such transfer and the subsequent holding of
the Certificate would not constitute or result in a prohibited transaction
within the meaning of Section 406 or 407 of ERISA, Section 4975 of the Code,
or any Similar Law. Each prospective transferee of a Subordinate Certificate
is shall deliver to the Depositor, the Certificate Registrar and the Trustee,
(a) a transfer or representation letter, substantially in the form of Exhibit
D-2 hereto, stating that the prospective transferee is not a Person referred
to in (i) or (ii) above, or (b) an Opinion of Counsel which establishes to the
satisfaction of the Depositor, the Trustee and the Certificate Registrar that
the purchase or holding of the Subordinate Certificate will not result in the
assets of the Trust Fund being deemed to be "plan assets" and subject to the
fiduciary responsibility or prohibited transaction provisions of ERISA, the
Code, or any Similar Law will not constitute or result in a prohibited
transaction within the meaning of Section 406 or Section 407 of ERISA or
Section 4975 of the Code, and will not subject the Servicer, the Special
Servicer, the Depositor, the Trustee or the Certificate Registrar to any
obligation or liability (including obligations or liabilities under ERISA or
Section 4975 of the Code), which Opinion of Counsel shall not be an expense of
the Trustee, the Trust Fund, the Servicer, the Special Servicer, Certificate
Registrar or the Depositor. Neither the Trustee, the Servicer, the Special
Servicer, nor the Certificate Registrar will register a Class __ or Class __
Certificate in any Person's name unless such Person has provided the letter
referred to in clause (a) above. Any transfer of a Subordinate Certificate
that would violate, or result in a prohibited transaction under, ERISA or
Section 4975 of the Code shall be deemed absolutely null and void ab initio.
(j) Each Person who has or acquires any Ownership Interest in a Class ________
Certificate or a Class _________ Certificate shall be deemed by the acceptance
or acquisition of such Ownership Interest to have agreed to be bound by the
following provisions, and the rights of each Person acquiring any Ownership
Interest in a Class __ Certificate or a Class __ Certificate are expressly
subject to the following provisions:
(i) Each Person acquiring or holding any Ownership
Interest in a Class Certificate or a Class
Certificate shall be a Permitted Transferee and
shall not acquire or hold such Ownership Interest as
agent (including as
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a broker, nominee or other middleman) on behalf of
any Person that is not a Permitted Transferee. Any
such Person shall promptly notify the Certificate
Registrar of any change or impending change in its
status (or the status of the beneficial owner of
such Ownership Interest) as a Permitted Transferee.
Any acquisition described in the first sentence of
this Section 5.2(j)(i) by a Person who is not a
Permitted Transferee or by a Person who is acting
as an agent of a Person who is not a Permitted
Transferee shall be void and of no effect, and the
immediately preceding owner who was a Permitted
Transferee shall be restored to registered and
beneficial ownership of the Ownership Interest as
fully as possible.
(ii) No Ownership Interest in a Class _____ Certificate
or a Class ____ Certificate may be transferred, and
no such Transfer shall be registered in the
Certificate Register, without the express written
consent of the Certificate Registrar, and the
Certificate Registrar shall not recognize a
proposed Transfer, and such proposed Transfer shall
not be effective, without such consent with respect
thereto. In connection with any proposed Transfer
of any Ownership Interest in a Class ___
Certificate or a Class _____ Certificate, the
Certificate Registrar shall, as a condition to such
consent, (x) require delivery to it in form and
substance satisfactory to it, and the proposed
transferee shall deliver to the Certificate
Registrar and to the proposed transferor, an
affidavit in substantially the form attached as
Exhibit ____ (a "Transferee Affidavit ") (A) that
such proposed transferee is a Permitted Transferee
and (B) stating that (i) the proposed transferee
historically has paid its debts as they have come
due and intends to do so in the future, (ii) the
proposed transferee understands that, as the holder
of an Ownership Interest in a Class ____
Certificate or a Class _____ Certificate, as
applicable , it may incur liabilities in excess of
cash flows generated by the residual interest,
(iii) the proposed transferee intends to pay taxes
associated with holding the Ownership Interest as
they become due, (iv) the proposed transferee will
not transfer the Ownership Interest to any Person
that does not provide a Transferee Affidavit or as
to which the proposed transferee has actual
knowledge that such Person is not a Permitted
Transferee or is acting as an agent (including as a
broker, nominee or other middleman) for a Person
that is not a Permitted Transferee, and (v) the
proposed transferee expressly agrees to be bound by
and to abide by the provisions of this Section
5.2(j) and (y) other than in connection with the
initial issuance of the Class _____ and Class
_________ Certificates, require a statement from
the proposed transferor substantially in the form
attached as Exhibit (the "Transferor Letter"), that
the proposed transferor has no actual knowledge
that the proposed transferee is not a Permitted
Transferee and has no actual knowledge or reason to
know that the proposed transferee's statements in
the preceding clauses (x)(B)(i) or (iii) are false.
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(iii) Notwithstanding the delivery of a Transferee
Affidavit by a proposed transferee under clause
(ii) above, if a Responsible Officer of the
Certificate Registrar has actual knowledge that the
proposed transferee is not a Permitted Transferee,
no Transfer to such proposed transferee shall be
effected and such proposed Transfer shall not be
registered on the Certificate Register; provided,
however, that the Certificate Registrar shall not
be required to conduct any independent
investigation to determine whether a proposed
transferee is a Permitted Transferee.
Upon notice to the Certificate Registrar that there has
occurred a Transfer to any Person that is a Disqualified Organization or an
agent thereof (including a broker, nominee, or middleman) in contravention of
the foregoing restrictions, and in any event not later than ___ days after a
request for information from the transferor of such Ownership Interest in a
Class Certificate or a Class Certificate, or such agent thereof, the
Certificate Registrar and the Trustee agree to furnish to the IRS and the
transferor of such Ownership Interest or such agent thereof such information
necessary to the application of Section 860E(e) of the Code as may be required
by the Code, including, but not limited to, the present value of the total
anticipated excess inclusions with respect to such Class
or Class Certificate (or portion thereof) for periods after such Transfer.
At the election of the Certificate Registrar and the Trustee, the Certificate
Registrar and the Trustee may charge a reasonable fee for computing and
furnishing such information to the transferor or to such agent thereof
referred to above; provided, however, that such Persons shall in no event be
excused from furnishing such information.
SECTION 5.3.
Book-Entry Certificates.
(a) The Class ________ Certificates, the Class _______
Certificates, the Class ________ Certificates, the Class B Certificates, the
Class _________ Certificates, the Class ________ Certificates, the Class
_________ Certificates and the Class _______ Certificates shall, in the case of
each such Class, initially be issued as one or more Book-Entry Certificates
registered in the name of the Securities Depository or its nominees and,
except as provided in subsection (c) below, transfer of such Certificates may
not be registered by the Certificate Registrar unless such transfer is to a
successor Securities Depository that agrees to hold such Certificates for the
respective Certificate Owners with Ownership Interests therein. Such
Certificate Owners shall hold and transfer their respective Ownership Interest
in and to such Certificates through the book-entry facilities of the
Securities Depository and, except as provided in subsection (c) below, shall
not be entitled to definitive, fully registered Certificates ("Definitive
Certificates") in respect of such Ownership Interests. All transfers by
Certificate Owners of their respective Ownership Interests in the Book-Entry
Certificates shall be made in accordance with the procedures established by
the Securities Depository Participant or brokerage firm representing each such
Certificate Owner. Each Securities Depository Participant shall only transfer
the Ownership Interests in the Book-Entry Certificates of Certificate Owners
it represents or of brokerage firms for which it acts as agent in accordance
with the Securities Depository's normal procedures. Neither the Certificate
Registrar nor the Trustee shall have any responsibility to monitor or restrict
the transfer of
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Ownership Interests in Book-Entry Certificates through the book-entry facilities
of the Securities Depository.
(b) The Trustee, the Servicer, the Special Servicer, the
Fiscal Agent and the Certificate Registrar may for all purposes, including the
making of payments due on the Book-Entry Certificates, deal with the
Securities Depository as the authorized representative of the Certificate
Owners with respect to such Certificates for the purposes of exercising the
rights of Certificateholders hereunder. The rights of Certificate Owners with
respect to the Book-Entry Certificates shall be limited to those established
by law and agreements between such Certificate Owners and the Securities
Depository Participants and brokerage firms representing such Certificate
Owners. Multiple requests and directions from, and votes of, the Securities
Depository as Holder of the Book-Entry Certificates with respect to any
particular matter shall not be deemed inconsistent if they are made with
respect to different Certificate Owners. The Trustee may establish a
reasonable record date in connection with solicitations of consents from or
voting by Certificateholders and shall give notice to the Securities
Depository of such record date.
(c) If (i)(A) the Depositor advises the Trustee and the
Certificate Registrar in writing that the Securities Depository is no longer
willing or able to properly discharge its responsibilities with respect to any
Class of the Book-Entry Certificates, and (B) the Depositor is unable to
locate a qualified successor, or (ii) the Depositor at its option advises the
Trustee and the Certificate Registrar in writing that it elects to terminate
the book-entry system through the Securities Depository with respect to any
Class of the Book-Entry Certificates, the Certificate Registrar shall notify
all affected Certificate Owners, through the Securities Depository, of the
occurrence of any such event and of the availability of Definitive
Certificates to such Certificate Owners requesting the same. Upon surrender to
the Certificate Registrar of any Class of the Book-Entry Certificates by the
Securities Depository, accompanied by registration instructions from the
Securities Depository for registration of transfer, the Trustee shall execute,
and the Certificate Registrar shall authenticate and deliver, the Definitive
Certificates to the Certificate Owners identified in such instructions. None
of the Depositor, the Servicer, the Special Servicer, the Trustee, the Fiscal
Agent or the Certificate Registrar shall be liable for any delay in delivery
of such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Certificates
for purposes of evidencing ownership of any of the Class _____ Certificates,
the Class Certificates, the Class ______ Certificates, the Class ______
Certificates, the Class _______ Certificates, the Class ________ Certificates,
the Class ______ Certificates and the Class __________ Certificates, the
registered holders of such Definitive Certificates shall be recognized as
Certificateholders hereunder and, accordingly, shall be entitled directly to
receive payments on, to exercise Voting Rights with respect to, and to
transfer and exchange such Definitive Certificates.
SECTION 5.4. Mutilated, Destroyed, Lost or Stolen
Certificates.
If (i) any mutilated Certificate is surrendered to the
Certificate Registrar, or the Certificate Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate, and (ii)
there is delivered to the Certificate Registrar such security or indemnity as
may be requited by it to save it, be Trustee and the Servicer harmless, then,
in the absence of
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actual knowledge by a Responsible Officer of the Certificate
Registrar that such Certificate has been acquired by a bona fide purchaser,
the Trustee or the Authenticating Agent shall execute and authenticate and the
Certificate Registrar shall deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of the
same Class and of like tenor and Percentage Interest. Upon the issuance of any
new Certificate under this Section 5.4, the Certificate Registrar may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and any other expenses (including the
fees and expenses of the Certificate Registrar) connected therewith. Any
replacement Certificate issued pursuant to this Section 5.4 shall constitute
complete and indefeasible evidence of ownership of the corresponding interest
in the Trust Fund, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
SECTION 5.5. Appointment of Paying Agent.
The Trustee may appoint a paying agent for the purpose of
making distributions to Certificateholders pursuant to Section 4.1. The
Trustee shall cause such Paying Agent, if other than the Trustee or the
Servicer, to execute and deliver to the Servicer and the Trustee an instrument
in which such Paying Agent shall agree with the Servicer and the Trustee that
such Paying Agent will hold all sums held by it for payment to
Certificateholders in trust for the benefit of the Certificateholders entitled
thereto until such sums have been paid to such Certificateholders or disposed
of as otherwise provided herein. The initial Paying Agent shall be the
Trustee. The Paying Agent shall at all times be an entity having a long-term
unsecured debt rating of at least "BBB" by each Rating Agency, unless each of
the Rating Agencies has confirmed in writing that a lower rating shall not
result, in and of itself, in a downgrading, withdrawal or qualification of the
rating then assigned by such Rating Agency to any Class of the Certificates.
SECTION 5.6. Access to Certificateholders' Names and
Addresses.
(a) If any Certificateholder (for purposes of this Section
5.6, an "Applicant") applies in writing to the Certificate Registrar, and such
application states that the Applicant desires to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and is accompanied by a copy of the communication which such
Applicant proposes to transmit, then the Certificate Registrar shall, at the
expense of such Applicant, within ___ Business Days after the receipt of such
application, transmit such communication to the Certificateholders as of the
most recent Record Date; provided, however, if such communication relates to
performance by the Servicer, the Special Servicer or the Trustee of its duties
hereunder, the Certificate Registrar shall furnish or cause to be furnished to
such Applicant a list of the names and addresses of the Certificateholders as
of the most recent Record Date.
(b) Every Certificateholder, by receiving and holding its
Certificate, agrees with the Trustee that the Trustee and the Certificate
Registrar shall not be held accountable in any way by reason of the disclosure
of any information as to the names and addresses of the Certificateholders
hereunder, regardless of the source from which such information was derived.
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SECTION 5.7. Actions of Certificateholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or
taken by Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders
in person or by an agent duly appointed in writing; and except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, when required, to
the Depositor, the Special Servicer or the Servicer. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Agreement and conclusive in favor of the Trustee, the
Depositor, the Special Servicer and the Servicer, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any
Certificateholder of any such instrument or writing may be proved in any
reasonable manner which the Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind every Holder of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, or omitted
to be done, by the Trustee, the Depositor, the Special Servicer or the
Servicer in reliance thereon, whether or not notation of such action is made
upon such Certificate.
(d) The Trustee or Certificate Registrar may require such
additional proof of any matter referred to in this Section 5.7 as it shall
deem necessary.
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ARTICLE VI
THE DEPOSITOR, THE SERVICER AND THE SPECIAL SERVICER
SECTION 6.1. Liability of the Depositor, the Servicer and
the Special Servicer.
The Depositor, the Servicer and the Special Servicer each
shall be liable in accordance herewith only to the extent of the obligations
specifically imposed by this Agreement.
SECTION 6.2. Merger or Consolidation of the Servicer and
Special Servicer.
Subject to the third paragraph of this Section 6.2, the
Servicer will keep in full effect its existence, rights and good standing as a
____________ ___________ under the laws of the State of __________ and will not
jeopardize its ability to do business in each jurisdiction in which one or
more of the Mortgaged Properties are located or to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage
Loans and to perform its respective duties under this Agreement.
Subject to the following paragraph, the Special Servicer
will keep in full effect its existence, rights and good standing as a
corporation under the laws of the State of Florida and will not jeopardize its
ability to do business in each jurisdiction in which one or more of the
Mortgaged Properties are located or to protect the validity and enforceability
of this Agreement, the Certificates or any of the Specially Serviced Mortgage
Loans and to perform its respective duties under this Agreement.
Each of the Servicer and the Special Servicer may be merged
or consolidated with or into any Person, or transfer all or substantially all
of its assets to any Person, in which case any Person resulting from any
merger or consolidation to which it shall be a party, or any Person succeeding
to its business, shall be the successor of the Servicer or the Special
Servicer, as applicable hereunder, and shall be deemed to have assumed all of
the liabilities of the Servicer or the Special Servicer, as applicable
hereunder, if each of the Rating Agencies has confirmed in writing that such
merger, consolidation or transfer and succession shall not result, in and of
itself, in a downgrading, withdrawal or qualification of the rating then
assigned by such Rating Agency to any Class of Certificates.
SECTION 6.3. Limitation on Liability of the Depositor,
the Servicer and Others.
Neither the Depositor, the Servicer, the Special Servicer,
the Extension Advisor nor any of the directors, officers, employees or agents
of the Depositor or the Servicer or the Special Servicer or the Extension
Advisor (or any general partner of the Servicer or, if applicable, the Special
Servicer or the Extension Advisor) shall be under any liability to the Trust
Fund or the Certificateholders for any action taken, or for refraining
from the taking of any action, in good faith pursuant to this Agreement, or
for errors in judgment; provided, however, that this provision shall not
protect the Depositor or the Servicer or the Special
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Servicer or any Extension Advisor or any such Person against any breach of
warranties or representations made herein, or against any specific liability
imposed on the Servicer or the Special Servicer or any Extension Advisor for a
breach of the Servicing Standard, or against any liability which would
otherwise be imposed by reason of its respective willful misfeasance, bad
faith, fraud or negligence in the performance of its duties or by reason of
reckless disregard of its respective obligations or duties hereunder. The
Depositor, the Servicer, the Special Servicer and any Extension Advisor and
any director, officer, employee or agent of the Depositor, the Servicer, the
Special Servicer and any Extension Advisor (or the general partner of the
Servicer or, if applicable, the Special Servicer or any Extension Advisor) may
rely in good faith on any document of any kind which, prima facie, is properly
executed and submitted by any appropriate Person with respect to any matters
arising hereunder. The Depositor, the Servicer, the Special Servicer and any
Extension Advisor and any director, officer, employee or agent of the
Depositor, the Servicer or the Special Servicer or any Extension Advisor (or
the general partner of the Servicer or, if applicable, the Special Servicer or
any Extension Advisor) shall be indemnified and held harmless by the Trust
Fund against any loss, liability or expense incurred in connection with any
legal action relating to this Agreement or the Certificates, other than any
loss, liability or expense (i) incurred by reason of its respective willful
misfeasance, bad faith, fraud or negligence or (in the case of the Servicer or
Special Servicer or any Extension Advisor) a breach of the Servicing Standard
in the performance of its respective duties or by reason of reckless disregard
of its respective obligations or duties hereunder; or (ii) imposed by any
taxing authority which loss, liability or expense is not specifically
reimbursable pursuant to the terms of this Agreement or which results from a
breach (other than a breach with respect to which the Servicer or Special
Servicer or any Extension Advisor, as applicable, would have no liability
under the standard set forth in the first sentence of this paragraph) by the
Servicer, the Special Servicer, the Extension Advisor or the agents of any of
them of its obligations hereunder. Neither the Depositor nor the Servicer nor
the Special Servicer shall be under any obligation to appear in, prosecute or
defend any legal action unless such action is related to its respective duties
under this Agreement and in its opinion does not expose it to any expense or
liability; provided, however, that the Depositor or the Servicer or the
Special Servicer or any Extension Advisor may in its discretion undertake any
action related to its obligations hereunder which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the
parties hereto and the interests of the Certificateholders hereunder. In such
event, the legal expenses and costs of such action and any liability resulting
therefrom (except any liability related to the Servicer's or the Special
Servicer's obligations under Section 3.1(a)) shall be expenses, costs and
liabilities of the Trust Fund, and the Depositor, the Servicer and the Special
Servicer shall be entitled to be reimbursed therefor from the Collection
Account as provided in Section 3.6(vi) of this Agreement.
SECTION 6.4. Limitation on Resignation of the Servicer and
of the Special Servicer.
Each of the Servicer and the Special Servicer may assign its
respective rights and delegate its respective duties and obligations under
this Agreement in connection with the sale or transfer of a substantial
portion of its mortgage servicing or asset management portfolio, provided
that: (i) the purchaser or transferee accepting such assignment and delegation
(A) shall be satisfactory to the Trustee, (B) shall be (I) an established
mortgage finance institution, bank
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or mortgage servicing institution, organized and doing business under the laws
of any state of the United States or the District of Columbia, authorized
under such laws to perform the duties of a servicer of mortgage loans or (II)
a Person resulting from a merger, consolidation or succession that is
permitted under Section 6.2, and (C) shall execute and deliver to the Trustee
an agreement, in form and substance reasonably satisfactory to the Trustee,
which contains an assumption by such Person of the due and punctual
performance and observance of each covenant and condition to be performed or
observed by the Servicer or the Special Servicer, as applicable, under this
Agreement from and after the date of such agreement; (ii) as evidenced by a
letter from each Rating Agency delivered to the Trustee, each Rating Agency's
rating or ratings of the Regular Certificates in effect immediately prior to
such assignment and delegation will not be qualified, downgraded or withdrawn
as a result of such assignment and delegation; (iii) the Servicer or the
Special Servicer, as applicable, shall not be released from its obligations
under this Agreement that arose prior to the effective date of such assignment
and delegation under this Section 6.4; and (iv) the rate at which the
Servicing Fee (or any component thereof) is calculated shall not exceed the
rate in effect prior to such assignment and delegation. Upon acceptance of
such assignment and delegation, the purchaser or transferee shall be the
successor Servicer or Special Servicer hereunder, as applicable.
Except as provided in this Section 6.4, neither the Servicer
nor the Special Servicer shall resign from the obligations and duties hereby
imposed on it except upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination permitting the
resignation of the Servicer or the Special Servicer, as applicable, shall be
evidenced by an Opinion of Counsel (obtained at the resigning Servicer's
expense) to such effect delivered to the Trustee.
No resignation or removal of the Servicer or the Special
Servicer, as applicable, as contemplated by the preceding paragraphs shall
become effective until the Trustee or a successor Servicer or the Special
Servicer, as applicable, shall have assumed the Servicer's or the Special
Servicer's responsibilities, duties, liabilities and obligations hereunder.
SECTION 6.5. Rights of the Depositor and the Trustee in
Respect of the Servicer and the Special
Servicer.
Each of the Servicer and the Special Servicer shall afford
the Depositor and the Trustee, upon reasonable notice, during normal business
hours access to all records maintained by it in respect of its rights and
obligations hereunder and access to its officers responsible for such
obligations. Upon request, each of the Servicer and the Special Servicer shall
furnish to the Depositor and the Trustee its most recent financial statements
and such other information in its possession regarding its business, affairs,
property and condition, financial or otherwise, as the party requesting such
information, in its reasonable judgment, determines to be relevant to the
performance of the obligations hereunder of the Servicer or the Special
Servicer. Neither the Depositor nor the Trustee shall have any responsibility
or liability for any action or failure to act by the Servicer or the Special
Servicer and neither such Person is obligated to supervise the performance of
the Servicer or the Special Servicer under this Agreement or otherwise.
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ARTICLE VII
DEFAULT
SECTION 7.1. Events of Default.
"Event of Default", wherever used herein, means any one of
the following events:
(i) any failure by the Servicer to remit to the
Collection Account or any failure by the Servicer
to remit to the Trustee for deposit into the
Distribution Account any amount required to be so
remitted by the Servicer pursuant to and in
accordance with the terms of this Agreement; or
(ii) any failure on the part of the Servicer or Special
Servicer duly to observe or perform in any material
respect any other of the covenants or agreements,
or the breach of any representations or warranties
provided herein on the part of the Servicer or the
Special Servicer which materially and adversely
affects the interests of the Certificateholders,
the Servicer, the Special Servicer or the Trustee
with respect to any Mortgage Loan and which, in
either event, continues unremedied for a period of
___ days after the date on which written notice of
such failure or breach, requiring the same to be
remedied, shall have been given to the Servicer or
Special Servicer by the Depositor or the Trustee,
or to the Servicer or Special Servicer, the
Depositor and the Trustee by the Holders of
Certificates entitled to at least __% of the
aggregate Voting Rights of any Class affected
thereby; or
(iii) confirmation in writing by any of the Rating
Agencies that the then-current rating assigned to
any Class of Certificates will be withdrawn,
downgraded or qualified if the Servicer or Special
Servicer is not removed as Servicer or Special
Servicer hereunder; or
(iv) a decree or order of a court or agency or
supervisory authority having jurisdiction in the
premises in an involuntary case under any present
or future federal or state bankruptcy, insolvency
or similar law for the appointment of a conservator
or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall
have been entered against the Servicer or Special
Servicer and such decree or order shall have
remained in force, undischarged or unstayed, for a
period of ___ days; or
(v) the Servicer or Special Servicer shall consent to
the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of
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debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Servicer
or the Special Servicer, or of or relating to all
or substantially all of the property of either the
Servicer or the Special Servicer; or
(vi) the Servicer or Special Servicer shall admit in
writing its inability to pay its debts generally as
they become due, file a petition to take advantage
of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its
obligations; or
(vii) the Servicer shall fail to make any Advance
required to be made by the Servicer hereunder
(whether or not the Trustee or the Fiscal Agent
makes such Advance);
then, and in each and every such case, so long as an Event of Default shall
not have been remedied, the Trustee may, and at the written direction of the
Holders of at least __% of the aggregate Voting Rights of all Certificates,
the Trustee shall, by notice in writing to the Servicer or the Special
Servicer, as the case may be, terminate all of its respective rights and
obligations under this Agreement and in and to the Mortgage Loans and the
proceeds thereof, other than any rights it may have hereunder as a
Certificateholder and any rights or obligations that accrued prior to the date
of such termination (including the right to receive all amounts accrued or
owing to it under this Agreement, plus interest at the Advance Rate on such
amounts until received to the extent such amounts bear interest as provided in
this Agreement, with respect to periods prior to the date of such termination,
and the right to the benefits of Section 6.3 notwithstanding any such
termination); provided, however, that in the event the Servicer and the
Special Servicer is the same Person, any termination of the Servicer shall
constitute a termination of the Special Servicer and vice versa. On or after
the receipt by the Servicer or the Special Servicer, as the case may be, of
such written notice, all of its authority and power under this Agreement,
whether with respect to the Certificates or the Mortgage Loans or otherwise,
shall pass to and be vested in the Trustee pursuant to and under this Section
(notwithstanding any failure of the Trustee to satisfy the criterion set forth
in Section 6.4) and, without limitation, the Trustee is hereby authorized and
empowered to execute and deliver, on behalf of and at the expense of the
defaulting Servicer or Special Servicer, as the case may be, as
attorney-in-fact or otherwise, any and all documents and other instruments,
and to do or accomplish all other acts or things necessary or appropriate to
effect the purposes of such notice of termination, whether to complete the
transfer and endorsement or assignment of the Mortgage Loans and related
documents, or otherwise. Each of the Servicer and the Special Servicer, on
behalf of itself, agrees in the event it is terminated pursuant to this
Section 7.1 promptly (and in any event no later than ___ Business Days
subsequent to such notice) to provide, at its own expense, the Trustee with
all documents and records requested by the Trustee to enable the Trustee to
assume its functions hereunder, and to cooperate with the Trustee and the
successor to its responsibilities hereunder in effecting the termination of
its responsibilities and rights hereunder, including, without limitation, the
transfer to the successor Servicer or Special Servicer or the Trustee, as
applicable, for administration by it of all cash amounts which shall at the
time be or should have been credited by the Servicer or the Special Servicer
to the Collection Account and any REO
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Account or Reserve Account or thereafter be received with respect to the
Mortgage Loans, and shall promptly provide the Trustee or such successor
Servicer or Special Servicer (which may include the Trustee), as applicable,
all documents and records reasonably requested by it, such documents and
records to be provided in such form as the Trustee or such successor Servicer
or Special Servicer shall reasonably request (including electromagnetic form),
to enable it to assume the Servicer's or Special Servicer's function
hereunder. All reasonable costs and expenses of the successor Servicer or
successor Special Servicer incurred in connection with transferring the
Mortgage Files to the successor Servicer (or copies of the Mortgage Files
relating to Specially Serviced Mortgage Loans to the Successor Special
Servicer) and amending this Agreement to reflect such succession as Servicer
or successor Special Servicer pursuant to this Section 7.1 shall be paid by
the predecessor Servicer or Special Servicer upon presentation of reasonable
documentation of such costs and expenses; provided, however, that if any such
costs and expenses remain unpaid by the predecessor Servicer or Special
Servicer within a reasonable time after presentation of such documentation,
the Trustee may be reimbursed from the Collection Account for such unpaid
costs and expenses, which shall be deemed to be expenses of the Trust Fund.
SECTION 7.2. Trustee to Act; Appointment of Successor.
On and after the time the Servicer or the Special Servicer
receives a notice of termination pursuant to Section 7.1, the Trustee shall be
its successor in such capacity in all respects under this Agreement and the
transactions set forth or provided for herein and, except as provided herein,
shall be subject to all the responsibilities, duties, limitations on liability
and liabilities relating thereto and arising thereafter placed on the Servicer
or Special Servicer by the terms and provisions hereof; provided, however,
that (i) the Trustee shall have no responsibilities, duties, liabilities or
obligations with respect to any act or omission of the Servicer or of the
Special Servicer and (ii) any failure to perform, or delay in performing, such
duties or responsibilities caused by the terminated party's failure to
provide, or delay in providing, records, tapes, disks, information or monies
shall not be considered a default by any successor hereunder. The appointment
of a successor Servicer or Special Servicer shall not affect any liability of
the predecessor Servicer or Special Servicer, as applicable, which may have
arisen prior to its termination as Servicer or Special Servicer. The Trustee
shall not be liable for any of the representations and warranties of the
Servicer or of the Special Servicer herein or in any related document or
agreement, for any acts or omissions of the predecessor Servicer or Special
Servicer, as applicable, or for any losses incurred in respect of any
Permitted Investment by the Servicer pursuant to Section 3.7 hereunder nor
shall the Trustee be required to purchase any Mortgage Loan hereunder. As
compensation therefor, the Trustee as successor Servicer or Special Servicer
shall be entitled to all Servicing Compensation relating to the Mortgage Loans
that accrue after the date of the Trustee's succession to which the Servicer
or Special Servicer would have been entitled if the Servicer or Special
Servicer, as applicable, had continued to act hereunder. In the event any
Advances made by the Servicer or the Trustee shall at any time be outstanding,
or any amounts of interest thereon shall be accrued and unpaid, all amounts
available to repay Advances and interest hereunder shall be applied entirely
to the Advances made by the Trustee (and the accrued and unpaid interest
thereon), until such Advances made by the Trustee (and accrued and unpaid
interest thereon) shall have been repaid in full. Notwithstanding the above,
the Trustee may, if it shall be unwilling to so act, or shall,
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if it is unable to so act, or if the Holders of Certificates entitled to at
least __% of the aggregate Voting Rights so request in writing to the Trustee,
or if (x) neither the Trustee nor the Fiscal Agent is rated by each Rating
Agency in one of its two highest long-term debt rating categories or (y) the
Trustee is not listed on S&P's list of approved servicers, promptly appoint,
or petition a court of competent jurisdiction to appoint, any established
mortgage loan servicing institution, the appointment of which will not result
in the downgrading, withdrawal or qualification of the rating or ratings then
assigned to any Class of Certificates as evidenced in writing by each Rating
Agency, as the successor to the Servicer or Special Servicer hereunder in the
assumption of all or any part of the responsibilities, duties or liabilities
of the Servicer or Special Servicer hereunder. No appointment of a successor
to the Servicer or Special Servicer hereunder shall be effective until the
assumption by such successor of all the Servicer's or Special Servicer's
responsibilities, duties and liabilities hereunder. Pending appointment of a
successor to the Servicer or Special Servicer hereunder, unless the Trustee
shall be prohibited by law from so acting, the Trustee shall act in such
capacity as herein above provided. In connection with such appointment and
assumption described herein, the Trustee may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and
such successor shall agree; provided, however, that no such compensation shall
be in excess of that permitted the terminated party hereunder. The Depositor,
the Trustee, the Servicer or Special Servicer and such successor shall take
such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.
SECTION 7.3. Notification to Certificateholders.
(a) Upon any termination pursuant to Section 7.1 above or
appointment of a successor to the Servicer or the Special Servicer, the
Trustee shall give prompt written notice thereof to Certificateholders at
their respective addresses appearing in the Certificate Register and to each
Rating Agency.
(b) Within ___ days after the occurrence of any Event of
Default of which a Responsible Officer of the Trustee has actual knowledge,
the Trustee shall transmit by mail to all Holders of Certificates and to each
Rating Agency notice of such Event of Default, unless such Event of Default
shall have been cured or waived.
SECTION 7.4. Other Remedies of Trustee.
During the continuance of any Event of Default, so long as
such Event of Default shall not have been remedied, the Trustee, in addition
to the rights specified in Section 7.1, shall have the right, in its own name
as trustee of an express trust, to take all actions now or hereafter existing
at law, in equity or by statute to enforce its rights and remedies and to
protect the interests, and enforce the rights and remedies, of the
Certificateholders (including the institution and prosecution of all judicial,
administrative and other proceedings and the filing of proofs of claim and
debt in connection therewith). In such event, the legal fees, expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Trust Fund, and the Trustee shall be entitled to
be reimbursed therefor from the Collection Account as provided in Section
3.6(vi). Except as otherwise expressly provided in this Agreement, no remedy
provided for by this Agreement shall be exclusive of any other remedy,
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and each and every remedy shall be cumulative and in addition to any other
remedy and no delay or omission to exercise any right or remedy shall impair
any such right or remedy or shall be deemed to be a waiver of any Event of
Default.
SECTION 7.5. Waiver of Past Events of Default;
Termination.
The Holders of Certificates evidencing not less than _____%
of the aggregate Voting Rights of the Certificates may, on behalf of all
Holders of Certificates, waive any default by the Servicer or Special Servicer
in the performance of its obligations hereunder and its consequences, except a
default in making any required deposits to (including P&I Advances) or
payments from the Collection Account or the Distribution Account or in
remitting payments as received, in each case in accordance with this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.1. Duties of Trustee.
(a) The Trustee, prior to the occurrence of an Event of
Default of which a Responsible Officer of the Trustee has actual knowledge and
after the curing or waiver of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement and no permissive right of the Trustee shall be
construed as a duty. During the continuance of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) The Trustee, upon receipt of any resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, shall examine them to
determine whether they conform on their face to the requirements of this
Agreement; provided, however, that, the Trustee shall not be responsible for
the accuracy or content of any such resolution, certificate, statement,
opinion, report, document, order or other instrument provided to it hereunder
by the Servicer, the Special Servicer, the Depositor, the Paying Agent or the
Auction Agent. If any such instrument is found not to conform on its face to
the requirements of this Agreement in a material manner, the Trustee shall
take action as it deems appropriate to have the instrument corrected.
(c) No provision of this Agreement shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided, however,
that the foregoing shall be subject to Section 8.2; and provided, further,
that:
(i) Prior to the occurrence of an Event of Default of
which a Responsible Officer of the Trustee has
actual knowledge, and after the curing or waiver of
all such Events of Default which may have occurred,
the duties and obligations of the Trustee shall be
determined solely by the express provisions of this
Agreement, the Trustee shall not be liable except
for the performance of such duties and obligations
as are specifically set forth in this Agreement, no
implied covenants or obligations shall be read into
this Agreement against the Trustee and, in the
absence of bad faith on the part of the Trustee,
the Trustee may conclusively rely, as to the truth
of the statements and the correctness of the
opinions expressed therein, upon any resolutions,
certificates, statements, reports, opinions,
documents, orders or other instruments furnished to
the Trustee that conform on their face to the
requirements of this Agreement without
responsibility for investigating the contents
thereof;
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(ii) The Trustee shall not be personally liable for an
error of judgment made in good faith by a
Responsible Officer or Responsible Officers, unless
it shall be proven that the Trustee was negligent
in ascertaining the pertinent facts;
(iii) The Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to
be taken by it in good faith in accordance with the
direction of Holders of Certificates entitled to at
least __% of the aggregate Voting Rights (or such
other percentage as is specified herein) of each
affected Class, or of the aggregate Voting Rights
of the Certificates, relating to the time, method
and place of conducting any proceeding for any
remedy available to the Trustee, or exercising or
omitting to exercise any trust or power conferred
upon the Trustee, under this Agreement; and
(iv) The Trustee shall not be charged with knowledge of
any failure by the Servicer or the Special Servicer
to comply with the obligations of the Servicer or
the Special Servicer referred to in clause (i) or
(ii) of Section 7.1, or of any breach or occurrence
referred to in clause (iii) through (viii) of
Section 7.1, unless a Responsible Officer of the
Trustee obtains actual knowledge of such failure,
breach or occurrence. The Trustee shall be deemed
to have actual knowledge of the Servicer's or the
Special Servicer's failure to comply with its
obligations listed in clause (i) of Section 7.1 or
to provide scheduled reports, certificates and
statements when and as required to be delivered to
the Trustee pursuant to this Agreement.
The Trustee, in its capacity as Trustee, shall not be
required to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if in the Trustee's opinion the
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it, and none of the provisions contained in this
Agreement shall in any event require the Trustee to perform, or be responsible
for the manner of performance of, any of the obligations of the Servicer or
the Special Servicer under this Agreement, except pursuant to Sections 4.6 or
6.4 during such time, if any, as the Trustee shall be the successor to, and be
vested with the rights, duties, powers and privileges of, the Servicer or the
Special Servicer in accordance with the terms of this Agreement. The Trustee
shall not be required to post any surety or bond of any kind in connection
with its performance of its obligations under this Agreement.
SECTION 8.2. Certain Matters Affecting the Trustee.
(a) Except as otherwise provided in Section 8.1:
(i) The Trustee may request and/or rely upon and shall
be protected in acting or refraining from acting
upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate,
statement, instrument,
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opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document
reasonably believed by it to be genuine and to have
been signed or presented by the proper party or
parties and the Trustee shall have no
responsibility to ascertain or confirm the
genuineness of any such party or parties;
(ii) The Trustee may consult with counsel and any
Opinion of Counsel shall be full and complete
authorization and protection in respect of any
action taken or suffered or omitted by it hereunder
in good faith and in accordance with such Opinion
of Counsel;
(iii) (A) The Trustee shall be under no obligation to
institute, conduct or defend any litigation
hereunder or in relation hereto at the request,
order or direction of any of the
Certificateholders, pursuant to the provisions of
this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses
and liabilities which may be incurred therein or
thereby; (B) the right of the Trustee to perform
any discretionary act enumerated in this Agreement
shall not be construed as a duty, and the Trustee
shall not be answerable for other than its
negligence or willful misconduct in the performance
of any such act; provided, however, that subject to
the foregoing clause (A), nothing contained herein
shall relieve the Trustee of the obligations, upon
the occurrence of an Event of Default (which has
not been cured or waived) of which a Responsible
Officer of the Trustee has actual knowledge, to
exercise such of the rights and powers vested in it
by this Agreement, and to use the same degree of
care and skill in their exercise, as a prudent
person would exercise or use under the
circumstances in the conduct of such person's own
affairs;
(iv) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good
faith and reasonably believed by it to be
authorized or within the discretion or rights or
powers conferred upon it by this Agreement;
(v) The Trustee shall not be bound to make any
investigation into the facts or matters stated in
any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order,
approval bond or other paper or document, unless
requested in writing to do so by Holders of
Certificates entitled to at least __% (or such
other percentage as is specified herein) of the
aggregate Voting Rights of any affected Class;
provided, however, that if the payment within a
reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the
opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the
terms of this Agreement, the Trustee may require
reasonable indemnity against such expense or
liability as a condition to taking any such action.
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The reasonable expense of every such investigation
shall be paid by the Servicer or the Special
Servicer if an Event of Default shall have occurred
and be continuing relating to the Servicer, or the
Special Servicer, respectively, and otherwise by
the Certificateholders requesting the
investigation; and
(vi) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either
directly or by or through agents or attorneys. The
Trustee shall not be liable or responsible for the
misconduct or negligence of any of the Trustee's
agents or attorneys appointed with due care by the
Trustee hereunder.
(b) Following the Start-up Day, the Trustee shall not,
except as expressly required by any provision of this Agreement, accept any
contribution of assets to the Trust Fund unless the Trustee shall have
received an Opinion of Counsel (the costs of obtaining such opinion to be
borne by the Person requesting such contribution) to the effect that the
inclusion of such assets in the Trust Fund will not cause either the
Upper-Tier REMIC or the Lower-Tier REMIC to fail to qualify as a REMIC at any
time that any Certificates are outstanding or subject either the Upper-Tier
REMIC or the Lower-Tier REMIC to any tax under the REMIC Provisions or other
applicable provisions of federal, state and local law or ordinances.
(c) All rights of action under this Agreement or under any
of the Certificates, enforceable by the Trustee, may be enforced by it without
the possession of any of the Certificates, or the production thereof at the
trial or other proceeding relating thereto, and any such suit, action or
proceeding instituted by the Trustee shall be brought in its name for the
benefit of all the Holders of such Certificates, subject to the provisions of
this Agreement.
The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the repurchase
of any Mortgage Loan by the Depositor pursuant to this Agreement or the
eligibility of any Mortgage Loan for purposes of this Agreement.
SECTION 8.3. Trustee Not Liable for Certificates or
Mortgage Loans.
The recitals contained herein and in the Certificates shall
not be taken as the statements of the Trustee, the Fiscal Agent, the Servicer
or the Special Servicer and the Trustee, the Fiscal Agent, the Special
Servicer and the Servicer assume no responsibility for their correctness. The
Trustee, the Fiscal Agent, the Servicer and the Special Servicer make no
representations or warranties as to the validity or sufficiency of this
Agreement, of the Certificates, or any private placement memorandum or
prospectus used to offer the Certificates for sale or the validity,
enforceability or sufficiency of any Mortgage Loan or related document. The
Trustee and the Fiscal Agent shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Mortgage or any Mortgage Loan, or the perfection and priority of any
Mortgage or the maintenance of any such perfection and priority, or for or
with respect to the sufficiency of the Trust Fund or its ability to generate
the payments to be distributed to Certificateholders under this Agreement.
Without limiting the
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foregoing, neither the Trustee nor the Fiscal Agent shall be liable or
responsible for: the existence, condition and ownership of any Mortgaged
Property; the existence of any hazard or other insurance thereon (other than,
with respect to the Trustee only, if the Trustee shall assume the duties of
the Servicer pursuant to Section 7.2) or the enforceability thereof; the
existence of any Mortgage Loan or the contents of the related Mortgage File on
any computer or other record thereof (other than, with respect to the Trustee
only, if the Trustee shall assume the duties of the Servicer or the Special
Servicer pursuant to Section 7.2); the validity of the assignment of any
Mortgage Loan to the Trust Fund or of any intervening assignment; the
completeness of any Mortgage File; the performance or enforcement of any
Mortgage Loan (other than, with respect to the Trustee only, if the Trustee
shall assume the duties of the Servicer or the Special Servicer pursuant to
Section 7.2); the compliance by the Depositor, the Servicer or the Special
Servicer with any warranty or representation made under this Agreement or in
any related document or the accuracy of any such warranty or representation
prior to the Trustee's receipt of notice or other discovery of any
non-compliance therewith or any breach thereof; any investment of monies by or
at the direction of the Servicer or the Special Servicer or any loss resulting
therefrom, it being understood that the Trustee only shall remain responsible
for any Trust Fund property that it may hold in its individual capacity; the
acts or omissions of any of the Depositor, the Servicer or the Special
Servicer (other than, with respect to the Trustee only, if the Trustee shall
assume the duties of the Servicer or the Special Servicer pursuant to Section
7.2) or any subservicer or any Borrower; any action of the Servicer or the
Special Servicer (other than, with respect to the Trustee only, if the Trustee
shall assume the duties of the Servicer or the Special Servicer pursuant to
Section 7.2) or any subservicer taken in the name of the Trustee, except with
respect to the Trustee, to the extent such action is taken at the express
written direction of the Trustee; the failure of the Servicer or the Special
Servicer or any subservicer to act or perform any duties required of it on
behalf of the Trust Fund or the Trustee hereunder; or any action by or
omission of the Trustee taken at the instruction of the Servicer or the
Special Servicer (other than in each case, with respect to the Trustee only,
if the Trustee shall assume the duties of the Servicer or the Special Servicer
pursuant to Section 7.2) unless the taking of such action is not permitted by
the express terms of this Agreement; provided, however, that the foregoing
shall not relieve the Trustee or the Fiscal Agent of its obligation to perform
its duties as specifically set forth in this Agreement. Under no circumstances
shall the Fiscal Agent be liable under any of the circumstances described in
the preceding sentence. The Trustee and the Fiscal Agent shall not be
accountable for the use or application by the Depositor, the Servicer or the
Special Servicer of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the
Depositor, the Servicer or the Special Servicer in respect of the Mortgage
Loans or deposited in or withdrawn from the Collection Account, or the
Distribution Account by the Depositor, the Servicer or the Special Servicer,
other than in each case, with respect to the Trustee only, any funds held by
the Trustee. The Trustee (unless the Trustee shall have become the successor
Servicer) or the Fiscal Agent shall have no responsibility for (A) filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder or to record this Agreement, (B) seeing to any
insurance, (C) seeing to the payment or discharge of any tax, assessment, or
other governmental charge or any lien or encumbrance of any kind owing with
respect to, assessed or levied against any part of the Trust Fund, or (D)
confirming or verifying the contents of any reports or certificates of the
Servicer delivered to the Trustee pursuant to this Agreement believed by the
Trustee to be
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genuine and to have been signed or presented by the proper party or parties.
In making any calculation hereunder which includes as a component thereof the
payment or distribution of interest for a stated period at a stated rate "to
the extent permitted by applicable law," the Trustee shall assume that such
payment is so permitted unless a Responsible Officer of the Trustee has actual
knowledge, or receives an Opinion of Counsel (at the expense of the Person
asserting the impermissibility) to the effect, that such payment is not
permitted by applicable law.
SECTION 8.4. Trustee May Own Certificates.
The Trustee and the Fiscal Agent in their individual
capacities or any other capacity may become the owner or pledgee of
Certificates, and may deal with the Depositor, the Servicer and the Special
Servicer in banking transactions, with the same rights each would have if it
were not Trustee or Fiscal Agent.
SECTION 8.5. Payment of Trustee's Fees and Expenses;
Indemnification.
(a) The Servicer covenants and agrees to pay to the Trustee
or any successor Trustee from time to time, and the Trustee or any successor
Trustee shall be entitled to receive from the Servicer the Trustee Fee (which
shall not be limited by any provision of law in regard to the compensation of
a trustee of an express trust) for all services rendered by the Trustee in the
execution of the trusts hereby created and in the exercise and performance of
any of the powers and duties hereunder of the Trustee.
(b) To the extent specifically permitted by Section 3.12(d),
the Trustee shall be paid or reimbursed from the Trust Fund upon its request
for expenses, disbursements and advances incurred or made by the Trustee
pursuant to and in accordance with any of the provisions of this Agreement
except any such expense, disbursement or advance as may arise from its
negligence or bad faith; provided, however, that the Trustee shall not refuse
to perform any of its duties hereunder solely as a result of the failure to be
paid the Trustee Fee and the Trustee's expenses.
The Servicer and the Special Servicer covenant and agree to
pay or reimburse the Trustee for the reasonable expenses, disbursements and
advances incurred or made by the Trustee in connection with any transfer of
the servicing responsibilities of the Servicer or the Special Servicer, as
applicable hereunder, pursuant to or otherwise arising from the resignation or
removal of the Servicer or the Special Servicer, as applicable, in accordance
with any of the provisions of this Agreement (and including the reasonable
fees and expenses and disbursements of its counsel and all other persons not
regularly in its employ), except any such expense, disbursement or advance as
may arise from the negligence or bad faith of the Trustee.
(c) Each of the Paying Agent, the Certificate Registrar, the
Custodian, the Servicer and the Special Servicer shall indemnify the Trustee
and the Fiscal Agent and their respective Affiliates and each of the
directors, officers, employees and agents of the Trustee, the Fiscal Agent and
their respective Affiliates (each, an "Indemnified Party"), and hold each of
them harmless against any, and all claims, losses, damages, penalties, fines,
forfeitures,
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reasonable and necessary legal fees and related costs, judgments, and any
other costs, fees and expenses that the Indemnified Party may sustain in
connection with this Agreement related to each such party's respective willful
misconduct, bad faith, fraud and/or negligence in the performance of its
respective duties hereunder or by reason of reckless disregard of its
respective obligations and duties hereunder (including in the case of the
Servicer or the Special Servicer, any agent of the Servicer or the Special
Servicer).
(d) The Trust Fund shall indemnify each Indemnified Party
from, and hold it harmless against, any and all losses, liabilities, damages,
claims or expenses (including reasonable attorneys' fees) arising in respect
of this Agreement or the Certificates, in each case to the extent, and only to
the extent, such payments are expressly reimbursable under this Agreement or
are "unanticipated expenses incurred by the REMIC" within the meaning of
Treasury Regulations Section 1.860G-1(b)(3)(ii), other than (i) those
resulting from the negligence, fraud, bad faith or willful misconduct of the
Trustee and (ii) those as to which such Indemnified Party is entitled to
indemnification pursuant to Section 8.5(c). The term "unanticipated expenses
incurred by a REMIC" shall include any fees, expenses and disbursements of any
separate trustee or co-trustee appointed hereunder, only to the extent such
fees, expenses and disbursements were not reasonably anticipated as of the
Closing Date and the losses, liabilities, damages, claims or expenses
(including reasonable attorneys' fees) incurred or advanced by an Indemnified
Party in connection with any litigation arising out of this Agreement,
including, without limitation, under Section 2.3, Section 3.10, the third
paragraph of Section 3.11, Section 8.11, Section 4.5, Section 5.1, and Section
7.1. The right of reimbursement of the Indemnified Parties under this Section
8.5(d) shall be senior to the rights of all Certificateholders.
(e) Notwithstanding anything herein to the contrary, this
Section 8.5 shall survive the termination or maturity of this Agreement or the
resignation or removal of the Trustee as regards rights accrued prior to such
resignation or removal and (with respect to any acts or omissions during their
respective tenures) the resignation, removal or termination of the Servicer,
the Special Servicer, the Paying Agent, the Certificate Registrar or the
Custodian.
(f) This Section 8.5 shall be expressly construed to
include, but not be limited to, such indemnities, compensation, expenses,
disbursements, advances, losses, liabilities, damages and the like, as may
pertain or relate to any environmental law or environmental matter.
SECTION 8.6. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of any state or the
United States of America, authorized under such laws to exercise corporate
trust powers and to accept the trust conferred under this Agreement, having a
combined capital and surplus of at least $_________ and a rating on its
unsecured long-term debt of at least "BBB" (or "AA" at any time when there is
no Fiscal Agent appointed and acting hereunder or any such Fiscal Agent so
appointed has a rating on its long-term unsecured debt that is lower than "AA"
(without regard to any plus or minus), unless each of the Rating Agencies has
confirmed in writing the appointment of such Fiscal Agent shall
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not result, in and of itself, in a downgrading, withdrawal or qualification of
the ratings then assigned by such Rating Agency to any Class of the
Certificates) from each Rating Agency, unless each of the Rating Agencies has
confirmed in writing that a lower rating shall not result, in and of itself,
in a downgrading, withdrawal or qualification of the rating then assigned by
such Rating Agency to any Class of the Certificates and subject to supervision
or examination by federal or state authority and shall not be an Affiliate of
the Servicer or the Special Servicer (except during any period when the
Trustee has assumed the duties of the Servicer or the Special Servicer, as
applicable, pursuant to Section 7.2). If a corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for
purposes of this Section the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. In the event that the place of
business from which the Trustee administers the Trust Fund is a state or local
jurisdiction that imposes a tax on the Trust Fund or the net income of a REMIC
(other than a tax corresponding to a tax imposed under the REMIC Provisions)
the Trustee shall elect, at its sole discretion, either to (i) resign
immediately in the manner and with the effect specified in Section 8.7, (ii)
pay such tax and continue as Trustee or (iii) administer the Trust Fund from a
state and local jurisdiction that does not impose such a tax. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions
of this Section, the Trustee shall resign immediately in the manner and with
the effect specified in Section 8.7.
SECTION 8.7. Resignation and Removal of the Trustee.
The Trustee may at any time resign and be discharged from
the trusts hereby created by giving written notice thereof to the Depositor,
the Servicer, the Special Servicer and each Rating Agency. Upon such notice of
resignation, the Fiscal Agent shall also be deemed to have been removed and,
accordingly, the Servicer shall promptly appoint a successor Trustee, which
appointment of successor Trustee shall not result, in and of itself, in a
downgrading, withdrawal or qualification of the rating then assigned by the
Rating Agencies to any Class of the Certificates as confirmed in writing by
each of the Rating Agencies, and successor Fiscal Agent, which, if the
successor Trustee is not rated by each Rating Agency in one of its two highest
long-term debt rating categories, shall be confirmed in writing by each of the
Rating Agencies that such appointment of successor Fiscal Agent shall not
result, in and of itself, in a downgrading, withdrawal or qualification of the
rating then assigned by such Rating Agency to any Class of the Certificates by
written instrument, in triplicate, which instrument shall be delivered to the
resigning Trustee, with a copy to the fiscal agent deemed removed, and the
successor Trustee and successor Fiscal Agent. Notwithstanding the foregoing,
if no successor Trustee and Fiscal Agent shall have been so appointed and have
accepted appointment within ___ days after the giving of such notice of
resignation, the resigning Trustee and departing Fiscal Agent may petition any
court of competent jurisdiction for the appointment of a successor Trustee and
successor Fiscal Agent.
If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.6 and shall fail to resign after
written request therefor by the Depositor or Servicer, or if at any time the
Trustee or the Fiscal Agent shall become incapable of acting, or shall be
adjudged bankrupt or insolvent, or a receiver of the Trustee or the Fiscal
Agent or
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of its property shall be appointed, or any public officer shall take charge or
control of the Trustee or the Fiscal Agent or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
or the Servicer may remove the Trustee and the Fiscal Agent and shall promptly
appoint a successor Trustee and successor Fiscal Agent by written instrument,
which shall be delivered to the Trustee and the Fiscal Agent so removed and to
the successor Trustee and successor Fiscal Agent.
The Holders of Certificates entitled to at least __% of the
Voting Rights may at any time remove the Trustee and the Fiscal Agent (and any
removal of the Trustee shall be deemed to be a removal also of the Fiscal
Agent) and appoint a successor Trustee and successor Fiscal Agent (each
meeting the requirements of Section 8.8) by written instrument or instruments,
in eight originals, signed by such Holders or their attorneys-in-fact duly
authorized, one complete set of which instruments shall be delivered to the
Depositor, one complete set to the Servicer, one complete set to the Special
Servicer, one complete set to the Trustee so removed, one complete set to the
Fiscal Agent deemed removed, one complete set to the successor Trustee so
appointed and one complete set to the successor Fiscal Agent so appointed.
In the event of the resignation or removal of the Trustee,
the Fiscal Agent shall be entitled to resign, it being understood that the
initial Fiscal Agent shall not be obligated to act in such capacity hereunder
at any time that is not the Trustee.
Any resignation or removal of the Trustee and Fiscal Agent
and appointment of a successor Trustee and, if such trustee is not rated by
each Rating Agency in one of its two highest long-term debt rating categories,
a successor Fiscal Agent pursuant to any of the provisions of this Section 8.7
shall not become effective until acceptance of appointment by the successor
Trustee and, if necessary, Fiscal Agent as provided in Section 8.8.
SECTION 8.8. Successor Trustee.
Any successor Trustee and any successor Fiscal Agent
appointed as provided in Section 8.7 shall execute, acknowledge and deliver to
the Depositor and to the predecessor Trustee and predecessor Fiscal Agent, as
the case may be, instruments accepting their appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee and
predecessor Fiscal Agent shall become effective and such successor Trustee and
successor Fiscal Agent, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as Trustee
herein, provided that each Rating Agency shall have confirmed in writing that
the appointment of such successor Trustee and successor Fiscal Agent shall not
result, in and of itself, in a downgrading, withdrawal or qualification of the
rating then assigned by such Rating Agency to any Class of the Certificates.
The predecessor Trustee shall deliver to the successor Trustee all Mortgage
Files and related documents and statements held by it hereunder, and the
Depositor, the predecessor Trustee and predecessor Fiscal Agent shall execute
and deliver such instruments and do such other things as may reasonably be
required for more fully and certainly vesting and confirming in the successor
Trustee and successor Fiscal Agent all such rights, powers, duties and
obligations. No successor Trustee or successor Fiscal Agent shall accept
appointment as provided in this Section 8.8 unless at the time of such
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acceptance such successor Trustee or successor Fiscal Agent shall be eligible
under the provisions of Section 8.6.
Upon acceptance of appointment by a successor Trustee or
successor Fiscal Agent as provided in this Section 8.8, the successor Trustee
shall mail notice of the succession of such Trustee and Fiscal Agent hereunder
to all Holders of Certificates at their addresses as shown in the Certificate
Register.
SECTION 8.9. Merger or Consolidation of Trustee.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder, provided that such corporation shall be eligible under the
provisions of Section 8.6, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding. Any Person into which the Fiscal Agent may be merged
or converted or with which it may be consolidated or any corporation or bank
resulting from any merger, conversion or consolidation to which the Fiscal
Agent shall be a party, or any corporation or banking association succeeding
to all or substantially all of the corporate trust business of the Fiscal
Agent shall be the successor of the Fiscal Agent hereunder, provided that such
corporation or bank shall be eligible under the provisions of Section 8.6
without the execution or filing of any paper or any farther act on the part of
any of the parties hereto, anything to the contrary notwithstanding.
SECTION 8.10. Appointment of Co-Trustee or
Separate Trustee.
Notwithstanding any other provisions hereof, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing the same may at the time be
located, the Depositor and the Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons
approved by the Trustee to act (at the expense of the Trustee) as co-trustee
or co-trustees, jointly with the Trustee, or separate trustee or separate
trustees, of all or any part of the Trust Fund, and to vest in such Person or
Persons, in such capacity, such title to the Trust Fund, or any part thereof,
and, subject to the other provisions of this Section 8.10, such powers,
duties, obligations, rights and trusts as the Depositor and the Trustee may
consider necessary or desirable. If the Depositor shall no longer be in
existence or shall not have joined in such appointment within __ days after
the receipt by it of a request so to do, or in case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to
make such appointment. Except as required by applicable law, the appointment
of a co-trustee or separate trustee shall not relieve the Trustee of its
responsibilities hereunder. No co-trustee or separate trustee hereunder shall
be required to meet the terms of eligibility as a successor Trustee under
Section 8.6 hereunder and no notice to Holders of Certificates of the
appointment of co-trustee(s) or separate trustee(s) shall be required under
Section 8.8 hereof.
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In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate trustee
or co-trustee is not authorized to act separately without the Trustee joining
in such act), except to the extent that under any law of any jurisdiction in
which any particular act or acts are to be performed (whether as Trustee
hereunder or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee solely at the direction
of the Trustee.
No trustee under this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this Agreement.
The Depositor and the Trustee acting jointly may at any time accept the
resignation of or remove any separate trustee or co-trustee, except that if
the Depositor is no longer in existence, or if the separate trustee or
co-trustee is an employee of the Trustee, the Trustee acting alone may accept
the resignation of or remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement
and the conditions of this Article VIII. Every such instrument shall be filed
with the Trustee. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating
to the conduct of, affecting the liability of, or affording protection to, the
Trustee. In no event shall any such separate trustee or co-trustee be entitled
to any provision relating to the conduct of, affecting the liability of, or
affording protection to such separate trustee or co-trustee that imposes a
standard of conduct less stringent than that imposed on the Trustee hereunder,
affording greater protection than that afforded to the Trustee hereunder or
providing a greater limit on liability than that provided to the Trustee
hereunder.
Any separate trustee or co-trustee may, at any time,
constitute the Trustee its agent or attorney-in-fact, with full power and
authority, to the extent not prohibited by law, to do any lawful act under or
in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts hereunder
shall vest in and be exercised by the Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
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SECTION 8.11. Authenticating Agent.
The Trustee may appoint an Authenticating Agent to execute
and to authenticate Certificates. The Authenticating Agent must be acceptable
to the Depositor and the Servicer and must be a corporation organized and
doing business under the laws of the United States of America or any state,
having a principal office and place of business in a state and city acceptable
to the Depositor and the Servicer, having a combined capital and surplus of at
least $_________, authorized under such laws to do a trust business and
subject to supervision or examination by federal or state authorities. The
Trustee shall serve as the initial Authenticating Agent and the Trustee hereby
accepts such appointment.
Any corporation into which the Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Authenticating Agent shall be party, or any corporation succeeding to the
corporate agency business of the Authenticating Agent, shall be the
Authenticating Agent without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
The Authenticating Agent may at any time resign by giving at
least ___ days' advance written notice of resignation to the Trustee, the
Depositor, the Special Servicer and the Servicer. The Trustee may at any time
terminate the agency of the Authenticating Agent by giving written notice of
termination to the Authenticating Agent, the Depositor, the Special Servicer
and the Servicer. Upon receiving a notice of resignation or upon such a
termination, or in case at any time the Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section 8.11, the Trustee
promptly shall appoint a successor Authenticating Agent, which shall be
acceptable to the Servicer and the Depositor, and shall mail notice of such
appointment to all Certificateholders. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the
rights, powers, duties and responsibilities of its predecessor hereunder, with
like effect as if originally named as Authenticating Agent herein. No
successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 8.11.
The Authenticating Agent shall have no responsibility or
liability for any action taken by it as such at the direction of the Trustee.
The Trustee shall pay the Authenticating Agent reasonable compensation from
its own funds.
SECTION 8.12. Appointment of Custodians.
The Trustee may appoint one or more Custodians to hold all
or a portion of the Mortgage Files as agent for the Trustee, by entering into
a Custodial Agreement. The Trustee agrees to comply with the terms of each
Custodial Agreement and to enforce the terms and provisions thereof against
the Custodian for the benefit of the Certificateholders. Each Custodian shall
be a depository institution subject to supervision by federal or state
authority, shall have a combined capital and surplus of at least $_________,
shall have a long-term debt rating of at least "BBB" from each Rating Agency,
unless each of the Rating Agencies has confirmed in writing that a lower
rating shall not result, in and of itself, in a downgrading,
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withdrawal or qualification of the rating then assigned by such Rating Agency
to any Class of the Certificates, and shall be qualified to do business in the
jurisdiction in which it holds any Mortgage File. Each Custodial Agreement may
be amended only as provided in Section 10.7. The Trustee shall pay the
Custodian reasonable compensation from its own funds. The Trustee shall serve
as the initial Custodian.
SECTION 8.13. Fiscal Agent Appointed; Concerning
the Fiscal Agent.
(a) The Trustee hereby appoints as the initial Fiscal Agent
hereunder for the purposes of exercising and performing the obligations and
duties imposed upon the Fiscal Agent by Sections 3.22, 4.6 and 7.2.
(b) The Fiscal Agent undertakes to perform such duties and
only such duties as are specifically set forth in Sections 3.22, 4.6 and 7.2.
(c) No provision of this Agreement shall be construed to
relieve the Fiscal Agent from liability for its own negligent failure to act,
bad faith or its own willful misfeasance; provided, however, that (i) the
duties and obligations of the Fiscal Agent shall be determined solely by the
express provisions of Sections 3.22, 4.6 and 7.2, the Fiscal Agent shall not
be liable except for the performance of such duties and obligations, no
implied covenants or obligations shall be read into this Agreement against the
Fiscal Agent and, in the absence of bad faith on the part of the Fiscal Agent,
the Fiscal Agent may conclusively rely, as to the truth and correctness of the
statements or conclusions expressed therein, upon any resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Fiscal Agent by the Depositor, the Servicer, the
Special Servicer or the Trustee and which on their face do not contradict the
requirements of this Agreement, and (ii) the provisions of clause (ii) of
Section 8.1(c) shall apply to the Fiscal Agent.
(d) Except as otherwise provided in Section 8.1(c), the
Fiscal Agent also shall have the benefit of provisions of clauses (i), (ii),
(iii) (other than the proviso thereto), (iv), (v) (other than the proviso
thereto) and (vi) of Section 8.2(a).
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ARTICLE IX
TERMINATION
SECTION 9.1. Termination.
(a) The respective obligations and responsibilities of the
Servicer, the Special Servicer, the Depositor, the Trustee and the Fiscal
Agent created hereby with respect to the Certificates (other than the
obligation to make certain payments and to send certain notices to
Certificateholders as hereinafter set forth) shall terminate immediately
following the occurrence of the last action required to be taken by the
Trustee pursuant to this Article IX on the Termination Date; provided,
however, that in no event shall the trust created hereby continue beyond the
expiration of twenty-one years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late ambassador of the United States to
the United Kingdom, living on the date hereof.
(b) The Trust Fund, the Upper-Tier REMIC and the Lower-Tier
REMIC shall be terminated and the assets of the Trust Fund shall be sold or
otherwise disposed of in connection therewith, only pursuant to a "plan of
complete liquidation" within the meaning of Code Section 860F(a)(4)(A)
providing for the actions contemplated by the provisions hereof pursuant to
which the applicable Notice of Termination is given and requiring that the
Trust Fund, the Upper-Tier REMIC and the Lower-Tier REMIC shall terminate on a
Distribution Date occurring not more than ___ days following the date of
adoption of the plan of complete liquidation. For purposes of this Section
9.1(b), the Notice of Termination given pursuant to Section 9.1(c) shall
constitute the adoption of the plan of complete liquidation as of the date
such notice is given, which date shall be specified by the Trustee in the
final federal income tax returns of the Upper-Tier REMIC and the Lower- Tier
REMIC.
(c) If the Trust Fund has not been previously terminated
pursuant to subsection (d) of this Section 9.1, the Special Servicer may
effect an early termination of the Trust Fund, upon not less than ___ days'
prior Notice of Termination given to the Trustee and the Servicer any time on
or after the Early Termination Notice Date specifying the Anticipated
Termination Date, by purchasing on such date all, but not less than all, of
the Mortgage Loans then included in the Trust Fund, and all property acquired
in respect of any Mortgage Loan, at a purchase price, payable in cash, equal
to not less than the greater of:
(i) the sum of
(A) ___% of the unpaid principal balance of
each Mortgage Loan included in the Trust
Fund as of the ___ day of the month
preceding such Distribution Date;
(B) the fair market value of all other
property included in the Trust Fund as of
the ____ day of the month preceding such
Distribution Date, as determined by an
Independent appraiser acceptable to the
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Servicer as of the date not more than __
days prior to the ____ day of the month
preceding such Distribution Date;
(C) all unpaid interest accrued on such
principal balance of each such Mortgage
Loan (including for this purpose any
Mortgage Loan as to which title to the
related Mortgaged Property has been
acquired) at the Mortgage Rate to the ____
day of the month preceding such
Distribution Date;
(D) the aggregate amount of unreimbursed
Advances (with interest thereon at the
Advance Rate) and unpaid Trust Fund
expenses; or
(ii) the aggregate fair market value of the Mortgage
Loans, and all other property acquired in respect
of any Mortgage Loan in the Trust Fund, on the ____
day of the month preceding such Distribution Date,
as determined by an Independent appraiser
acceptable to the Servicer as of a date not more
than ___ days prior to the _____ day of the month
preceding such Distribution Date, together with
____ month's interest thereon at the Mortgage Rate
and disposition expenses.
Any Holder of a Class Certificate representing greater than
a __% Percentage Interest in such Class, the Servicer or the Depositor may
also effect such termination as provided above if it first notifies the
Special Servicer through the Trustee of its intention to do so in writing at
least __ days prior to the Early Termination Notice Date and the Special
Servicer does not terminate the Trust Fund as described above within such __
day period. All costs and expenses incurred by any party to this Agreement or
by the Trust Fund in connection with the purchase of the Mortgage Loans and
other assets of the Trust Fund pursuant to this Section 9.1(c) shall be borne
by the party exercising its purchase rights hereunder. The Trustee shall be
entitled to rely conclusively on any determination made by an Independent
appraiser pursuant to this subsection (c).
(d) If the Trust Fund has not been previously terminated
pursuant to subsection (c) of this Section 9.1, on or after the Auction
Valuation Date, the Trustee shall conduct an auction of the Mortgage Loans in
accordance with the following principles:
(i) The Trustee shall request that four Independent
financial advisory or investment banking or
investment brokerage firms nationally recognized in
the field of real estate analysis and reasonably
acceptable to the Servicer and the Special Servicer
provide the Trustee with an estimated value at
which the Mortgage Loans and all other property in
respect of any Mortgage Loan in the Trust Fund
could be sold at an auction. If the aggregate value
of the Mortgage Loans and such property, as
determined by the average of the three highest such
estimates, equals or exceeds the aggregate amount
of the Certificate Balances of all Certificates
outstanding as of the close of business on the
Auction Valuation Date (the "Aggregate Certificate
Balance") plus the Auction Fees, Servicing Fees,
Trustee Fees
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and all other incidental expenses, the Trustee
shall (A) adopt a "plan of complete liquidation",
as required by Section 9.1(b) hereof, and (B)
appoint an Auction Agent to solicit offers from
Qualified Offerors to purchase all (but not less
than all) of the Mortgage Loans and such property
in accordance with the Auction Procedures for a
price that is not less than the Aggregate
Certificate Balance plus the Auction Fees,
Servicing Fees, Trustee Fees and all other
incidental expenses. In the event that there is an
auction of the Mortgage Loans and such property the
Auction Agent shall be authorized to employ
Independent attorneys and other Independent
professional consultants (including, without
limitation, appraisers and environmental
consultants) as reasonably required to conduct such
sale.
(ii) In determining the Aggregate Certificate Balance,
there shall be included all Certificates owned by
or on behalf of the Depositor, the Servicer, the
Trustee, a Manager or a Borrower or any Affiliate
thereof, notwithstanding the proviso in the first
sentence of the definition of the term
"Certificateholder."
(iii) The Trustee shall reject every bid that the Auction
Agent advises the Trustee in writing (a) is from a
Person other than a Qualified Offeror, (b) provides
for a purchase price that is less than the
Aggregate Certificate Balance plus the Auction
Fees, Servicing Fees, Trustee Fees and all other
incidental expenses, (c) provides for purchase on
terms other than all-cash or (d) is contingent on
the occurrence or non-occurrence of any event
(each, a "Deficient Auction Bid"). If all bids
received by the Trustee are Deficient Auction Bids,
as advised by the Auction Agent, the Mortgage Loans
and such property shall not be sold and there shall
be no termination of the Trust Fund pursuant to
this Section 9.1(d).
(iv) The Trustee shall accept the highest bid that is
not a Deficient Auction Bid and shall deliver a
Notice of Termination to the Servicer, the Special
Servicer and the Certificateholders specifying the
Anticipated Termination Date (which shall be first
Distribution Date following the date of closing of
the sale of the Mortgage Loans and such property).
The Trustee shall sell the Mortgage Loans and such
property to the successful bidder at a closing to
be held no later than the Remittance Date
immediately preceding the Auction Proceeds
Distribution Date.
(v) The Trustee shall be entitled to be reimbursed from
the Collection Account for expenses (which shall be
deemed to be expenses of the Trust Fund) that it or
the Auction Agent on its behalf incurs pursuant to
this Section 9.1(d) in connection with the
valuation and sale of the Mortgage Loans and such
property (collectively, the "Auction Fees"),
including all fees and reasonable expenses of legal
counsel and other professional consultants retained
by either of the Trustee or the Auction Agent. The
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Trustee shall not be personally liable for any act
or omission of the Auction Agent hereunder or any
Independent attorneys and other Independent
professional consultants appointed by the Auction
Agent.
(vi) Any auction shall be conducted in accordance with
auction procedures to be developed by the auction
agent in connection with such auction (the "Auction
Procedures"), provided that such procedures shall
include at a minimum provisions substantially to
the effect that: (i) no due diligence of the
Servicer's, the Special Servicer's or the Trustee's
records with respect to the Mortgage Loans may be
conducted by any bidder prior to being notified
that it has submitted the highest bid; (ii) the
Auction Agent is entitled to require that the
highest bidder provide a non-refundable good faith
deposit sufficient to reimburse the Trustee and the
Auction Agent for all expenses in connection with
the evaluation of such bid and in connection with
such highest bidder's due diligence, (iii) each
bidder may be required to enter into a
confidentiality agreement with the Servicer, the
Special Servicer, the Auction Agent and the Trustee
prior to being permitted to conduct due diligence,
(iv) Borrowers on any of the Mortgage Loans shall
be prohibited from submitting bids, and (v) in the
event that the highest bidder withdraws, the next
highest bidder shall be permitted to conduct due
diligence as if it were the highest bidder.
(e) If the Trust Fund has not been previously terminated
pursuant to subsection (c) or (d) of this Section 9.1, the Trustee shall
determine as soon as practicable the Distribution Date on which the Trustee
reasonably anticipates, based on information with respect to the Mortgage
Loans previously provided to it, that the final distribution will be made (i)
to the Holders of outstanding Regular Certificates, and to the Trustee in
respect of the Lower-Tier Regular Interests notwithstanding that such
distribution may be insufficient to distribute in full the Certificate Balance
of each Certificate or Lower-Tier Regular Interest, together with amounts
required to be distributed on such Distribution Date pursuant to Section
4.1(a) or (ii) if no such Classes of Certificates are then outstanding, to the
Holders of the Class Certificates of any amount remaining in the Collection
Account and to the Holders of the Class Certificates of any amount remaining
in the Distribution Account, in either case, following the later to occur of
(A) the receipt or collection of the last payment due on any Mortgage Loan
included in the Trust Fund or (B) the liquidation or disposition pursuant to
Section 3.18 of the last asset held by the Trust Fund.
(f) Notice of any termination of the Trust Fund pursuant to
this Section 9.1 shall be mailed by the Trustee to affected Certificateholders
with a copy to the Servicer and each Rating Agency at their addresses shown in
the Certificate Registrar as soon as practicable after the Trustee shall have
received, given or been deemed to have received a Notice of Termination but in
any event not more than ____ days, and not less than ____ days, prior to the
Anticipated Termination Date. The notice mailed by the Trustee to affected
Certificateholders shall:
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(i) specify the Anticipated Termination Date on which
the final distribution is anticipated to be made to
Holders of Certificates of the Classes specified
therein;
(ii) specify the amount of any such final distribution,
if known; and
(iii) state that the final distribution to
Certificateholders will be made only upon
presentation and surrender of Certificates at the
office of the Paying Agent therein specified.
If the Trust Fund is not terminated on any Anticipated Termination Date for
any reason, the Trustee shall promptly mail notice thereof to each affected
Certificateholder.
(g) Any funds not distributed on the Termination Date
because of the failure of any Certificateholders to tender their Certificates
shall be set aside and held in trust for the account of the appropriate
non-tendering Certificateholders, whereupon the Trust Fund shall terminate. If
any Certificates as to which notice of the Termination Date has been given
pursuant to this Section 9.1 shall not have been surrendered for cancellation
within ___ months after the time specified in such notice, the Trustee shall
mail a second notice to the remaining Certificateholders, at their last
addresses shown in the Certificate Register, to surrender their Certificates
for cancellation in order to receive, from such funds held, the final
distribution with respect thereto. If within one year after the second notice
any Certificate shall not have been surrendered for cancellation, the Trustee
may, directly or through an agent, take appropriate steps to contact the
remaining Certificateholders concerning surrender of their Certificates. The
costs and expenses of maintaining such funds in trust and of contacting
Certificateholders shall be paid out of such funds. If within two years after
the second notice, any such Certificates shall not have been surrendered for
cancellation, the Paying Agent shall pay to the Servicer all amounts
distributable to the Holders thereof, at which time the obligations of the
Trustee to such Holders with respect to such amounts shall terminate, and the
Servicer shall thereafter hold such amounts for the benefit of such Holders.
No interest shall accrue or be payable to any Certificateholder on any amount
held as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section 9.1.
Such funds held by the Servicer shall not be invested.
SECTION 9.2. Additional Termination Requirements.
In the event that (a) the holder of a Class Certificate
representing greater than a __% Percentage Interest in such Class, the
Servicer or the Depositor exercises its purchase option as provided in Section
9.1(c) or (b) the procedures for sale of all Mortgage Loans as provided in
Section 9.1(d) are initiated, the Trust Fund shall be terminated in accordance
with the following additional requirements: provided that the Trustee has
received an Opinion of Counsel or other evidence to the effect that the
termination of the Trust Fund (i) will constitute a "qualified liquidation" of
each of the Upper-Tier REMIC and the Lower-Tier REMIC within the meaning of
Code Section 860F(a)(4)(A-3) and (ii) will not subject either the Upper-Tier
REMIC or the Lower-Tier REMIC to tax or cause either the Upper-Tier REMIC or
the Lower-Tier REMIC to fail to qualify as a REMIC at any time that any
Certificates are outstanding:
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(a) The notice given by the holder of a Class ______
Certificate representing greater than a __% Percentage Interest in such Class,
under Section 9.1 shall provide that such notice constitutes the adoption of a
plan of complete liquidation of the Trust Fund as of the date of such notice
(or, if earlier, the date on which the first such notice is mailed to the
Trustee and the Servicer). The Trustee shall also specify such date in a
statement attached to the final tax returns of each of the Upper-Tier REMIC
and the Lower-Tier REMIC; and
(b) At or after the time of adoption of such a plan of
complete liquidation and at or prior to the Final Distribution Date, the
Trustee shall sell all of the assets of the Trust Fund to the holder of such
Class ______ Certificates, the Servicer or the Depositor (or otherwise
pursuant to the provisions of Section 9.1(d)) for cash at the purchase price
specified in Section 9.1 and shall distribute such cash in the manner
specified in Section 9.1.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Counterparts.
This Agreement may be executed simultaneously in any number
of counterparts, each of which counterparts shall be deemed to be an original,
and such counterparts shall constitute but one and the same instrument.
SECTION 10.2. Limitation on Rights of
Certificateholders.
The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal representatives or heirs to claim an accounting or
to take any action or proceeding in any court for a partition or winding up of
the Trust Fund, nor otherwise affect the rights, obligations and liabilities
of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the
operation and management of the Trust Fund, or the obligations of the parties
hereto, nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from
time to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by reason of any
action taken by the parties to this Agreement pursuant to any provision
hereof.
No Certificateholder shall have any right to institute any
suit, action or proceeding in equity or at law upon or under or with respect
to this Agreement or the Mortgage Loans, unless, with respect to this
Agreement, such Holder previously shall have given to the Trustee a written
notice of default and of the continuance thereof, as hereinbefore provided,
and unless also the Holders of Certificates representing at least __% of the
aggregate Voting Rights allocated to each affected Class of Certificates shall
have made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Trustee,
for ___ days after its receipt of such notice, request and offer of indemnity,
shall have neglected or refused to institute any such action, suit or
proceeding. It is understood and intended, and expressly covenanted by each
Certificateholder with every other Certificateholder and the Trustee, that no
one or more Holders of Certificates of any Class shall have any right in any
manner whatever by virtue of any provision of this Agreement to affect,
disturb or prejudice the rights of the Holders of any other of such
Certificates, or to obtain or seek to obtain priority over or preference to
any other such Holder, or to enforce any right under this Agreement, except in
the manner herein provided and for the equal, ratable and common benefit of
all Holders of Certificates of such Class. For the protection and enforcement
of the provisions of this Section, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
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SECTION 10.3. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES)
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 10.4. Notices.
All demands, notices and communications hereunder shall be
in writing, shall be deemed to have been given upon receipt (or, in the case
of notice by telecopy, upon confirmation of receipt) as follows:
If to the Trustee or the Fiscal Agent, to:
____________ or ______________
Attention:
With copies to:
If to the Depositor, to:
Prudential Securities Secured Financing
Corporation
One New York Plaza
New York, New York 10292
Attention: Head of Commercial Mortgage
Group
With copies to:
O'Melveny & Myers
Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Laurence G. Preble, Esq.
Telecopy No.: (212) 326-2061
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<PAGE>
If to the Servicer, to:
----------------------------
-----------------------------
Attention: _________________
Telecopy No.: (___) ________
With copies to:
------------------------
-----------------
___________, __________
Attention: _______________________
Telecopy No.: (___) ________
If to the Special Servicer, to:
---------------------
-----, ------- ------
Attention: ________________
Telecopy No.: (___) ________
With copies to:
---------------------------------
---------------------------------
-----, ------- -----
Attention: _______________
Telecopy No.: (___) ________
If to the Mortgage Loan Seller, to:
----------------------------
---------------, ------ -----
Attention: _________________
Telecopy No.: (___) ________
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With copies to:
------------------------
-------------------
___________, __________
Attention: _______________________
Telecopy No.: (___) ________
If to any Certificateholder, to:
the address set forth in the
Certificate Register,
or, in the case of the parties to this Agreement, to such other address as
such party shall specify by written notice to the other parties hereto.
SECTION 10.5. Severability of Provisions.
If any one or more of the covenants, agreements, provisions
or terms of this Agreement shall be for any reason whatsoever held invalid,
then, to the extent permitted by applicable law, such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or of
the Certificates or the rights of the Holders thereof.
SECTION 10.6. Notice to the Depositor and Each
Rating Agency.
(a) The Trustee shall use its best efforts to promptly
provide written notice to the Depositor and each Rating Agency with respect to
each of the following of which a Responsible Officer of the Trustee has actual
knowledge:
(i) any material change or amendment to this Agreement;
(ii) the occurrence of any Event of Default that has not
been cured;
(iii) the merger, consolidation, resignation or
termination of the Servicer, Special Servicer,
Trustee or Fiscal Agent;
(iv) the repurchase of Mortgage Loans pursuant to
Section 2.3(d) or 2.3(e);
(v) the final payment to any Class of
Certificateholders;
(vi) each report to Certificateholders described in
Section 4.2;
(b) The Servicer shall promptly furnish to each Rating
Agency copies of the following:
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(i) each of its annual statements as to compliance
described in Section 3.14;
(ii) each of its annual independent public accountants'
servicing reports described in Section 3.15.
(iii) annual reports of each Borrower with respect to the
net operating income and occupancy rates required
to be delivered by the related Mortgage and
actually received by the Servicer pursuant thereto
to the extent consistent with applicable law and
the related Mortgage Loan Documents.
(c) The Special Servicer, shall furnish each Rating Agency
with such information with respect to any Specially Serviced Mortgage Loan as
such Rating Agency shall request and which the Special Servicer can obtain to
the extent consistent with applicable law and the related Mortgage Loan
Documents.
(d) Notices to each Rating Agency shall be addressed as
follows:
or in each case to such other address as any Rating Agency shall specify by
written notice to the parties hereto.
SECTION 10.7. Amendment.
This Agreement or any Custodial Agreement may be amended
from time to time by the Depositor, the Servicer, the Special Servicer, the
Trustee and the Fiscal Agent, without the consent of any of the
Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement
any provisions herein or therein that may be inconsistent with any other
provisions herein or therein, (iii) to amend any provision hereof to the
extent necessary or desirable to maintain the rating or ratings assigned to
each of the Classes of Regular Certificates by each Rating Agency, or (iv) to
make any other provisions with respect to matters or questions arising under
this Agreement, which shall not be inconsistent with the provisions of this
Agreement and will not result in the downgrading, withdrawal or qualification
of the rating or ratings then assigned to any outstanding Class of
Certificates, as confirmed by each Rating Agency in writing and, in all cases,
which, as evidenced by an Opinion of Counsel at the expense of the party
(other than the Trustee, unless such amendment modifies or otherwise relates
solely to the
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obligations, duties or rights of the Trustee) requesting such amendment, shall
not adversely affect in any material respect the interests of any
Certificateholder.
This Agreement or any Custodial Agreement may also be
amended from time to time by the Depositor, the Servicer, the Special
Servicer, the Trustee and the Fiscal Agent with the consent of the Holders of
each of the Classes of Regular Certificates representing not less than ___% of
the aggregate Voting Rights allocated to each Class of Certificates affected
by the amendment for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Certificateholders; provided,
however, that no such amendment shall:
(i) reduce in any manner the amount of, or delay the
timing of, payments received on Mortgage Loans
which are required to be distributed on any
Certificate without the consent of each affected
Certificateholder;
(ii) change the percentages of Voting Rights of Holders
of Certificates which are required to consent to
any action or inaction under this Agreement,
without the consent of the Holders of all
Certificates then outstanding; or
(iii) alter the servicing standard set forth in Section
3.1 or the obligations of the Servicer, the Trustee
or the Fiscal Agent to make a P&I Advance or
Property Advance without the consent of the Holders
of all Certificates representing all of the Voting
Rights of the Class or Classes affected thereby.
Further, the Depositor, the Servicer, the Special Servicer,
the Trustee and the Fiscal Agent, at any time and from time to time, without
the consent of the Certificateholders, may amend this Agreement or any
Custodial Agreement to modify, eliminate or add to any of its provisions to
such extent as shall be necessary to maintain the qualification of the Trust
REMICs as two separate REMICs, or to prevent the imposition of any additional
material state or local taxes, at all times that any Certificates are
outstanding; provided, however, that such action, as evidenced by an Opinion
of Counsel (obtained at the expense of the Trust Fund), is necessary or
helpful to maintain such qualification or to prevent the imposition of any
such taxes, and would not adversely affect in any material respect the
interest of any Certificateholder.
In the event that neither the Depositor nor the successor
thereto, if any, is in existence, any amendment under this Section 10.7 shall
be effective with the consent in writing of the Trustee, the Fiscal Agent, the
Servicer, the Special Servicer, and, to the extent required by this Section,
the Certificateholders and each Rating Agency.
Promptly after the execution of any amendment, the Servicer
shall furnish written notification of the substance of such amendment to each
Certificateholder and each Rating Agency.
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It shall not be necessary for the consent of
Certificateholders under this Section 10.7 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The method of obtaining such consents and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe;
provided, however, that such method shall always be by affirmation and in
writing.
Notwithstanding any contrary provision of this Agreement, no
amendment shall be made to this Agreement or any Custodial Agreement unless
the Servicer and the Trustee shall have received an Opinion of Counsel, at the
expense of the party requesting such amendment (or, if such amendment is
required by any Rating Agency to maintain the rating issued by it or requested
by the Trustee for any purpose described in clause (i) or (ii) of the first
sentence of this Section, then at the expense of the Trust Fund), to the
effect that such amendment will not cause either the Upper-Tier REMIC or
Lower-Tier REMIC to fail to qualify as a REMIC at any time that any
Certificates are outstanding or cause a tax to be imposed on the Trust Fund
under the REMIC Provisions (other than a tax at the highest marginal corporate
tax rate on net income from foreclosure property).
Prior to the execution of any amendment to this Agreement or
any Custodial Agreement, the Trustee, the Fiscal Agent, the Special Servicer
and the Servicer shall be entitled to receive and rely conclusively upon an
Opinion of Counsel, at the expense of the party requesting such amendment (or,
if such amendment is required by any Rating Agency to maintain the rating
issued by it or requested by the Trustee for any purpose described in clause
(i), (ii) or (iv) (which do not modify or otherwise relate solely to the
obligations, duties or rights of the Trustee) of the first sentence of this
Section, then at the expense of the Trust Fund) stating that the execution of
such amendment is authorized or permitted by this Agreement. The Trustee may,
but shall not be obligated to, enter into any such amendment which affects the
Trustee's own rights, duties or immunities under this Agreement.
SECTION 10.8. Confirmation of Intent.
It is the express intent of the parties hereto that the
conveyance of the Trust Fund (including the Mortgage Loans) by the Depositor
to the Trustee on behalf of Certificateholders as contemplated by this
Agreement and the sale by the Depositor of the Certificates be, and be treated
for all purposes as, a sale by the Depositor of the undivided portion of the
beneficial interest in the Trust Fund represented by the Certificates. It is,
further, not the intention of the parties that such conveyance be deemed a
pledge of the Trust Fund by the Depositor to the Trustee to secure a debt or
other obligation of the Depositor. However, in the event that, notwithstanding
the intent of the parties, the Trust Fund is held to continue to be property
of the Depositor then (a) this Agreement shall also be deemed to be a security
agreement under applicable law; (b) the transfer of the Trust
Fund provided for herein shall be deemed to be a grant by the Depositor to the
Trustee on behalf of Certificateholders of a first priority security interest
in all of the Depositor's right, title and interest in and to the Trust Fund
and all amounts payable to the holders of the Mortgage Loans in accordance
with the terms thereof and all proceeds of the conversion, voluntary or
involuntary, of the foregoing into cash, instruments, securities or other
property, including, without limitation, all amounts from time to time held
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or invested in the Collection Account and the Distribution Account, whether in
the form of cash, instruments, securities or other property; (c) the
possession by the Trustee (or the Custodian on its behalf) of Notes and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
and ________ Uniform Commercial Codes; and (d) notifications to Persons
holding such property, and acknowledgments, receipts or confirmations from
Persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the Trustee for the purpose of perfecting
such security interest under applicable law. Any assignment of the interest of
the Trustee pursuant to any provision hereof shall also be deemed to be an
assignment of any security interest created hereby. The Depositor shall, and
upon the request of the Servicer, the Trustee shall, to the extent consistent
with this Agreement (and at the expense of the Trust Fund), take such actions
as may be necessary to ensure that, if this Agreement were deemed to create a
security interest in the Mortgage Loans, such security interest would be
deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such throughout the term of this Agreement. It
is the intent of the parties that such a security interest would be effective
whether any of the Certificates are sold, pledged or assigned.
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<PAGE>
IN WITNESS WHEREOF, the Depositor, the Servicer, the Special
Servicer, the Trustee and the Fiscal Agent have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the
day and year first above written.
Signed and acknowledged PRUDENTIAL SECURITIES SECURED
in the presence of: FINANCING CORPORATION
as Depositor
- ------------------------------
Print Name:
- ------------------------------- By: ___________________________
Print Name: Name:
Title
Signed and acknowledged --------------
in the presence of: as Servicer
- -----------------------------
Print Name: By: ___________________
its General Partner
- ----------------------------- By: _________________________
Print Name: Name:
Title:
Signed and acknowledged ----------------------
in the presence of: as Special Servicer
- ------------------------------- By: _________________________
Print Name: Name:
Title:
- -------------------------------
Print Name:
------------------------------
Signed and acknowledged as Trustee, Custodian, Certificate
in the presence of: Registrar and Paying Agent
- -------------------------------
Print Name:
- ------------------------------- By: __________________________
Print Name: Name:
Title: Vice President
<PAGE>
Signed and acknowledged -----------------
in the presence of: as Fiscal Agent of the Trustee
- -------------------------------
Print Name:
- ------------------------------- By: __________________________
Print Name: Name:
Title:
NY1-585655.V1 04/09/98
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___th day of _________ , before me appeared
_____________________ to me personally known, who being by me duly sworn did
say that he is a ______________ of PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, a Delaware corporation and that he signed his name thereto under
authority of the board of directors of said corporation and on behalf of such
corporation.
WITNESS my hand and seal hereto affixed the day and year
first above written.
NOTARY PUBLIC in and for said
County and State
My Commission expires:
(stamp)
(seal)
<PAGE>
STATE OF _______ )
) ss.:
COUNTY OF _______ )
On this ___th day of _________ , before me appeared
____________________, to me personally known, who being by me duly sworn did
say that he is a [Title] of _________, a ________ corporation, the general
partner of _________, a _______________________, and that the seal affixed to
the foregoing instrument is the corporate seal of said corporation, and that
said instrument was signed and sealed on behalf of said corporation by
authority of its board of directors as the general partner of said
___________________, and said __________________ acknowledged said instrument
to be the free act and deed of said corporation as the general partner of said
_________________ and the free act and deed of said ________________.
WITNESS my hand and seal hereto affixed the day and year
first above written.
------------------------------
NOTARY PUBLIC in and for said
County and State
My Commission expires:
(stamp)
(seal)
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On this ___th day of _______ , before me appeared
____________________, to me personally known, who being by me duly sworn did
say that he is a [Title] of the _______ a corporation, and that the seal
affixed to the foregoing instrument is the corporate seal of said corporation,
and that said instrument was signed and sealed on behalf of said corporation
by authority of its board of directors, and said __________________
acknowledged said instrument to be the free act and deed of said corporation
and the free act and deed of said corporation.
WITNESS my hand and seal hereto affixed the day and year
first above written.
-------------------------------
NOTARY PUBLIC in and for said
County and State
My Commission expires:
(stamp)
(seal)
<PAGE>
STATE OF ________ )
) ss.:
COUNTY OF ________ )
On this ___th day of ________ , before me, the undersigned,
a Notary Public in and for the State of ________, duly commissioned and sworn,
personally appeared _____________________, to me known who, by me duly sworn,
did depose and acknowledge before me and say that he resides at _____________;
that he is the _____________________ of ____________ , a nationally chartered
bank, the corporation described in and that executed the foregoing instrument;
and that he signed his name thereto under authority of the board of directors
of said corporation and on behalf of such corporation.
WITNESS my hand and seal hereto affixed the day and year
first above written.
----------------------------
NOTARY PUBLIC in and for the
State of New York.
My Commission expires:
(stamp)
(seal)
This instrument prepared by:
- ----------------------------
Name:
-------------
Address:
<PAGE>
STATE OF ________ )
) ss.:
COUNTY OF _______ )
On the ___th day of , before me, ________________, a Notary
Public in and for said State, personally appeared _____________________,
___________________ and __________________, _____________________, personally
known to me or proved to me on the basis of satisfactory evidence to be the
persons whose names are subscribed to the within instrument and acknowledged
to me that they executed the same in their authorized capacity, and that by
their signatures on the instrument the corporation upon behalf of which the
person acted executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
my official seal the day and year in this certificate first above written.
-----------------------------
NOTARY PUBLIC
My commission expires ___________________
