-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, COaU5tkBnBYyowqz2hGhx4Z42/qlZk3bux2M3wAwnfEhPWZd2khxYTzYEoIHO1CW 1bOm2mDKKZvuT5zSzT0J6A== 0000882377-98-000007.txt : 19980115 0000882377-98-000007.hdr.sgml : 19980115 ACCESSION NUMBER: 0000882377-98-000007 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19980114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICIFC SECURED ASSETS CORP CENTRAL INDEX KEY: 0001018905 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 330715871 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-44209 FILM NUMBER: 98506180 BUSINESS ADDRESS: STREET 1: 20371 IRVINE AVE STREET 2: SUITE 200 CITY: SANTA ANA HEIGHTS STATE: CA ZIP: 92707 BUSINESS PHONE: 7145560122 MAIL ADDRESS: STREET 1: 20371 IRVINE AVE STREET 2: SUITE 200 CITY: SANTA ANA HEIGHTS STATE: CA ZIP: 92707 S-3 1 ICIFC SECURED ASSETS CORP. As filed with the Securities and Exchange Commission on January 13, 1998 Registration No. 333-______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- ICIFC SECURED ASSETS CORP. (Exact name of Registrant as specified in its charter) CALIFORNIA 33-071587 1 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 20371 IRVINE AVENUE WILLIAM ASHMORE SUITE 200 20371 IRVINE AVENUE SANTA ANA HEIGHTS, CALIFORNIA 92707 SANTA ANA HEIGHTS, CALIFORNIA 92707 (714) 556-0122 (714) 556-0122 (Address, including zip code, and (Name, address, including zip code, and telephone number, telephone number, including area code, of Registrant's including area code, of agent for principal executive offices) service with respect to the Registrant) -------------- COPIES TO: PAUL D. TVETENSTRAND DAVID BARBOUR THACHER PROFFITT & WOOD ANDREWS & KURTH L.L.P. TWO WORLD TRADE CENTER 1717 MAIN STREET, SUITE 3700 NEW YORK, NEW YORK 10048 DALLAS, TEXAS 75201 (214) 659-4400 -------------- Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement as determined by market conditions and pursuant to Rule 415. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. /_/ If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box./X/ If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. /_/ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. /_/ If the delivery of the Prospectus Supplement is expected to be made pursuant to Rule 434, please check the following box. /_/ --------------
CALCULATION OF REGISTRATION FEE ================================ ==================== ====================== =========================== ==================== Proposed Maximum Proposed Amount of Proposed Title of Securities to Amount to Be Offering Price Per Maximum Aggregate Registration be Registered Registered Unit (1) Offering Price (1) Fee (2) - -------------------------------- -------------------- ---------------------- --------------------------- -------------------- Pass-Through Certificates and Mortgage-Backed Notes, issued $1,000,000 100% $1,000,000 $295.00 in series...................... ================================ ==================== ====================== =========================== ====================
(1) Estimated solely for the purpose of calculating the registration fee on the basis of the proposed maximum offering price per unit. -------------- THIS REGISTRATION HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. EXPLANATORY NOTE This Registration Statement contains (i) a form of Prospectus (the "RESIDENTIAL LOAN PROSPECTUS") relating to the offering of one or more series of Pass-Through Certificates and/or Mortgage-Backed Notes, secured by one-to-four family and/or multifamily residential first and/or junior mortgage loans or manufactured housing conditional sales contracts and installment loan agreements and (ii) a form of Prospectus (the "COMMERCIAL LOAN PROSPECTUS") relating to the offering of one or more series of Pass-Through Certificates, secured by one or more segregated pools of various types of multifamily or commercial mortgage loans, mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans. Three versions of prospectus supplements relating to the Residential Loan Prospectus have been incorporated by reference into this Registration Statement, and nine versions of prospectus supplements relating to the Commercial Loan Prospectus and replacement pages to the Commercial Loan Prospectus with respect to such versions are included in this Registration Statement. Immediately preceding the Commercial Loan Prospectus, there are nine sets of pages labeled in the upper right corner as follows: "Version 1: Multifamily Properties", "Version 2: Office Properties", "Version 3: Retail Properties", "Version 4: Hotel Properties", "Version 5: Health Care-Related Facilities", "Version 6: Industrial Properties", "Version 7: Self-Storage Facilities," "Version 8: Mobile Home Parks," and Version 9: Condominium Properties". Each such "version" contains a cover page to be substituted in the Commercial Loan Prospectus and five pages with inserts to the Commercial Loan Prospectus and related prospectus supplement showing the text specific to concentration in each of the nine types of properties contemplated by the Registrant for purposes of the Commercial Loan Prospectus (i.e. multifamily properties, office properties, retail properties, health care-related facilities, industrial properties, self-storage facilities, mobile home parks and condominiums). The above described nine "versions" of changes to the Commercial Loan Prospectus and prospectus supplement are being filed with this Registration Statement for purposes of identifying changes that will be made to the Commercial Loan Prospectus and related prospectus supplement as a result of concentrations in any specific securitization transaction. Depending on the types of properties that involve concentration in any particular transaction, the respective changes to the Commercial Loan Prospectus and related prospectus supplement from one or more of the above described "versions" will be included in the Commercial Loan Prospectus and related prospectus supplement for that transaction. The Commercial Loan Prospectus and related prospectus supplement reflecting such changes will be filed at the time and in the manner provided by Rule 424 under the Securities Act of 1933. VERSION 1: MULTIFAMILY PROPERTIES PROSPECTUS ICIFC SECURED ASSETS CORP. DEPOSITOR PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). Multifamily properties consisting of five or more rental or cooperatively owned dwellings will represent security for a material concentration of the Mortgage Loans (or the mortgage loans underlying the CMBS) in any Trust Fund, based on principal balance at the time such Trust Fund is formed. If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) --------------------------------- PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 VERSION 1: MULTIFAMILY PROPERTIES The following will be inserted on page ii of the Prospectus Supplement, immediately following the second sentence of the first paragraph: Multifamily properties consisting of five or more rental or cooperatively owned dwellings will represent security for a material concentration of the Mortgage Loans in any Trust Fund, based on principal balance at the time such Trust Fund is formed. -2- VERSION 1: MULTIFAMILY PROPERTIES The following will be inserted in the Table of Contents of the Commercial Loan Prospectus, immediately following "Risk Factors--Risks Associated with Mortgage Loans and Mortgaged Properties": Risks Particular to Multifamily Rental Properties............[page no.] -3- VERSION 1: MULTIFAMILY PROPERTIES The following will be inserted in the Table of Contents of the Prospectus Supplement, immediately following "Description of the Mortgage Pool--General": Mortgage Loans Secured by Multifamily Rental Properties......[page no.] -4- VERSION 1: MULTIFAMILY PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "RISK FACTORS," immediately following "Risks Associated with Mortgage Loans and Mortgaged Properties" and in the Prospectus Supplement under "RISK FACTORS," immediately following "Risks Associated with Certain of the Mortgage Loans and Mortgaged Properties": RISKS PARTICULAR TO MULTIFAMILY RENTAL PROPERTIES Adverse economic conditions, either local or national, may limit the amount of rent that can be charged for rental units, and may result in a reduction in timely rent payments or a reduction in occupancy levels without a corresponding decrease in expenses. Occupancy and rent levels may also be affected by construction of additional housing units, local military base closings and national and local politics, including, in the case of multifamily rental properties, current or future rent stabilization and rent control laws and agreements. In addition, the level of mortgage interest rates may encourage tenants in multifamily rental properties to purchase single-family housing. Further, the cost of operating a multifamily property may increase, including the cost of utilities and the costs of required capital expenditures. Furthermore, the rent limitations imposed on Mortgaged Properties eligible to receive low-income housing tax credits pursuant to Section 42 of the Code ("Section 42 Properties") may adversely affect the ability of the applicable borrowers to increase rents to maintain such Mortgaged Properties in proper condition during periods of rapid inflation or declining market value of such Mortgaged Properties. In addition, the income restrictions on tenants imposed by Section 42 of the Code may reduce the number of eligible tenants in such Mortgaged Properties and result in a reduction in occupancy rates applicable thereto. Furthermore, some eligible tenants may not find any differences in rents between the Section 42 Properties and other multifamily rental properties in the same area to be a sufficient economic incentive to reside at a Section 42 Property, which may have fewer amenities or otherwise be less attractive as a residence. Additionally, the characteristics of a neighborhood may change over time or in relation to newer developments. All of these conditions and events may increase the possibility that a borrower may be unable to meet its obligations under its Mortgage Loan. -5- VERSION 1: MULTIFAMILY PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "DESCRIPTION OF THE TRUST FUNDS," immediately following "Mortgage Loans--General" and in the Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL," immediately following "General": MORTGAGE LOANS SECURED BY MULTIFAMILY RENTAL PROPERTIES Significant factors determining the value and successful operation of a multifamily property are the location of the property, the number of competing residential developments in the local market (such as apartment buildings, manufactured housing communities and site-built single family homes), the physical attributes of the multifamily apartment building (such as its age and appearance) and state and local regulations affecting such property. In addition, the successful operation of an apartment building will depend upon other factors such as its reputation, the ability of management to provide adequate maintenance and insurance, and the types of services it provides. Certain states regulate the relationship of an owner and its tenants. Commonly, these laws require a written lease, good cause for eviction, disclosure of fees, and notification to residents of changed land use, while prohibiting unreasonable rules, retaliatory evictions, and restrictions on a resident's choice of unit vendors. Apartment building owners have been the subject of suits under state "Unfair and Deceptive Practices Acts" and other general consumer protection statutes for coercive, abusive or unconscionable leasing and sales practices. A few states offer more significant protection. For example, there are provisions that limit the basis on which a landlord may terminate a tenancy or increase its rent or prohibit a landlord from terminating a tenancy solely by reason of the sale of the owner's building. In addition to state regulation of the landlord-tenant relationship, numerous counties and municipalities impose rent control on apartment buildings. These ordinances may limit rent increases to fixed percentages, to percentages of increases in the consumer price index, to increases set or approved by a governmental agency, or to increases determined through mediation or binding arbitration. In many cases, the rent control laws do not permit vacancy decontrol. Local authority to impose rent control is preempted by state law in certain states, and rent control is not imposed at the state level in those states. In some states, however, local rent control ordinances are not preempted for tenants having short-term or month-to-month leases, and properties there may be subject to various forms of rent control with respect to those tenants. Any limitations on a borrower's ability to raise property rents may impair such borrower's ability to repay its Mortgage Loan from its net operating income or the proceeds of a sale or refinancing of the related Mortgaged Property. Adverse economic conditions, either local or national, may limit the amount of rent that can be charged and may result in a reduction in timely rent payments or a reduction in occupancy levels. Occupancy and rent levels may also be affected by construction of additional housing units, local military base closings and national and local politics, including current or future rent stabilization and rent control laws and agreements. In addition, the level of mortgage interest rates may encourage tenants to purchase single-family housing. The location and construction quality of a particular building may affect the occupancy level as well as the rents that may be charged for individual units. The characteristics of a neighborhood may change over time or in relation to newer developments. -6- VERSION 2: OFFICE PROPERTIES PROSPECTUS ICIFC SECURED ASSETS CORP. DEPOSITOR PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). Office buildings will represent security for a material concentration of the Mortgage Loans (or the mortgage loans underlying the CMBS) in any Trust Fund, based on principal balance at the time such Trust Fund is formed. If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) --------------------------------- PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 VERSION 2: OFFICE PROPERTIES The following will be inserted on page ii of the Prospectus Supplement, immediately following the second sentence of the first paragraph: Office buildings will represent security for a material concentration of the Mortgage Loans in any Trust Fund, based on principal balance at the time such Trust Fund is formed. -2- VERSION 2: OFFICE PROPERTIES The following will be inserted in the Table of Contents of the Commercial Loan Prospectus, immediately following "Risk Factors--Risks Associated with Mortgage Loans and Mortgaged Properties": Risks Particular to Office Properties........................[page no.] -3- VERSION 2: OFFICE PROPERTIES The following will be inserted in the Table of Contents of the Prospectus Supplement, immediately following "Description of the Mortgage Pool--General": Mortgage Loans Secured by Office Properties..................[page no.] -4- VERSION 2: OFFICE PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "RISK FACTORS," immediately following "Risks Associated with Mortgage Loans and Mortgaged Properties" and in the Prospectus Supplement under "RISK FACTORS," immediately following "Risks Associated with Certain of the Mortgage Loans and Mortgaged Properties": RISKS PARTICULAR TO OFFICE PROPERTIES In addition to risks generally associated with real estate, Mortgage Loans secured by office properties are also affected significantly by adverse changes in population and employment growth (which creates demand for office space), local competitive conditions (such as the supply of office space or the existence or construction of new competitive office buildings), the quality and management philosophy of management, the attractiveness of the properties to tenants and their customers or clients, the attractiveness of the surrounding neighborhood and the need to make major repairs or improvements to satisfy the needs of major tenants. In addition, office properties may be adversely affected by an economic decline in the business operated by their tenants. Such decline may result in one or more significant tenants ceasing operations at such locations (which may occur on account of a voluntary decision not to renew a lease, bankruptcy or insolvency of such tenants, such tenants' general cessation of business activities or for other reasons). If office properties have a single tenant or if there is a significant concentration of tenants in a particular business or industry, the risk of such an economic decline increases. -5- VERSION 2: OFFICE PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "DESCRIPTION OF THE TRUST FUNDS," immediately following "Mortgage Loans--General" and in the Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL," immediately following "General": MORTGAGE LOANS SECURED BY OFFICE PROPERTIES Significant factors affecting the value of office properties include, without limitation, the quality of the tenants in the building, the physical attributes of the building in relation to competing buildings, the location of the building with respect to the central business district or population centers, demographic trends within the metropolitan area to move away from or towards the central business district, social trends combined with space management trends (which may change towards options such as telecommuting or hoteling to satisfy space needs), tax incentives offered to businesses by cities or suburbs adjacent to or near the city where the building is located and the strength and stability of the market area as a desirable business location. Office properties may be adversely affected by an economic decline in the business operated by their tenants. If office properties have a single tenant or if there is a significant concentration of tenants in a particular business or industry, the risk of such an economic decline increases. Office properties are also subject to competition with other office properties in the same market. Competition is affected by a building's age, condition, design (including floor sizes and layout), access to transportation, availability of parking and ability to offer certain amenities to its tenants (including sophisticated building systems, such as fiberoptic cables, satellite communications or other base building technological features). The success of an office property also depends on the local economy. Factors such as labor cost and quality, tax environment and such quality of life matters as schools and cultural amenities are generally considered in the decision of a business to locate its headquarters in a particular area. A central business district may have a substantially different economy from that of a suburb. The local economy will affect an office property's ability to attract stable tenants on a consistent basis. In addition, the cost of refitting office space for a new tenant is often higher than for other property types. -6- VERSION 3: RETAIL PROPERTIES PROSPECTUS ICIFC SECURED ASSETS CORP. Depositor PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). Retail properties will represent security for a material concentration of the Mortgage Loans (or the mortgage loans underlying the CMBS) in any Trust Fund, based on principal balance at the time such Trust Fund is formed. If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) --------------------------------- PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 VERSION 3: RETAIL PROPERTIES The following will be inserted on page ii of the Prospectus Supplement, immediately following the second sentence of the first paragraph: Retail properties will represent security for a material concentration of the Mortgage Loans in any Trust Fund, based on principal balance at the time such Trust Fund is formed. -2- VERSION 3: RETAIL PROPERTIES The following will be inserted in the Table of Contents of the Commercial Loan Prospectus, immediately following "Risk Factors--Risks Associated with Mortgage Loans and Mortgaged Properties": Risks Particular to Retail Properties........................[page no.] -3- VERSION 3: RETAIL PROPERTIES The following will be inserted in the Table of Contents of the Prospectus Supplement, immediately following "Description of the Mortgage Pool--General": Mortgage Loans Secured by Retail Properties..................[page no.] -4- VERSION 3: RETAIL PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "RISK FACTORS," immediately following "Risks Associated with Mortgage Loans and Mortgaged Properties" and in the Prospectus Supplement under "RISK FACTORS," immediately following "Risks Associated with Certain of the Mortgage Loans and Mortgaged Properties": RISKS PARTICULAR TO RETAIL PROPERTIES In addition to risks generally associated with real estate, Mortgage Loans secured by retail properties are also affected significantly by adverse changes in consumer spending patterns, local competitive conditions (such as the supply of retail space or the existence or construction of new competitive shopping centers or shopping malls), alternative forms of retailing (such as direct mail, video shopping networks and selling through the Internet which reduce the need for retail space by retail companies), the quality and management philosophy of management, the attractiveness of the properties and the surrounding neighborhood to tenants and their customers, the public perception of the safety of customers at shopping malls and shopping centers, and the need to make major repairs or improvements to satisfy the needs of major tenants. Retail properties may be adversely affected if a significant tenant ceases operations at such locations (which may occur on account of a voluntary decision not to renew a lease, bankruptcy or insolvency of such tenant, such tenant's general cessation of business activities or for other reasons). Significant tenants at a retail property play an important part in generating customer traffic and making a retail property a desirable location for other tenants at such property. In addition, certain tenants at retail properties may be entitled to terminate their leases if an anchor tenant ceases operations at such property. In such cases, there can be no assurance that any such anchor tenants will continue to occupy space in the related shopping centers. -5- VERSION 3: RETAIL PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "DESCRIPTION OF THE TRUST FUNDS," immediately following "Mortgage Loans--General" and in the Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL," immediately following "General": MORTGAGE LOANS SECURED BY RETAIL PROPERTIES Retail properties generally derive all or a substantial percentage of their income from lease payments from commercial tenants. Income from and the market value of retail properties is dependent on various factors including, but not limited to, the ability to lease space in such properties, the ability of tenants to meet their lease obligations, the possibility of a significant tenant becoming a debtor in a bankruptcy case under the Bankruptcy Code, as well as fundamental aspects of real estate such as location and market demographics. The correlation between the success of tenant businesses and property value is more direct with respect to retail properties than other types of commercial property because a significant component of the total rent paid by retail tenants is often tied to a percentage of gross sales. Declines in sales of tenants of retail properties will likely cause a corresponding decline in percentage rents and such tenants may become unable to pay their rent or other occupancy costs. The default by a tenant under its lease could result in delays and costs in enforcing the lessor's rights. Repayment of the related mortgage loans will be affected by the expiration of space leases and the ability of the respective borrowers to renew or relet the space on comparable terms. Even if vacated space is successfully relet, the costs associated with reletting, including tenant improvements, leasing commissions and free rent, could be substantial and could reduce cash flow from the retail properties. Whether a retail property is "anchored" or "unanchored" is also a relevant factor. Generally, retail properties that are anchored are perceived to be less risky. A retail anchor tenant is normally understood to be proportionately large in size and vital in attracting customers to the property. Furthermore, the correlation between the success of tenant businesses and property value is increased when the property is a single tenant property. Unlike office or hotel properties, retail properties also face competition from sources outside a given real estate market. Catalogue retailers, home shopping networks, telemarketing, selling through the Internet, and outlet centers all compete with more traditional retail properties for consumer dollars. Continued growth of these alternative retail outlets (which are often characterized by lower operating costs) could adversely affect the rents collectible at retail properties. -6- VERSION 4: HOTEL PROPERTIES PROSPECTUS ICIFC SECURED ASSETS CORP. DEPOSITOR PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). Hotel properties will represent security for a material concentration of the Mortgage Loans (or the mortgage loans underlying the CMBS) in any Trust Fund, based on principal balance at the time such Trust Fund is formed. If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) --------------------------------- PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 VERSION 4: HOTEL PROPERTIES The following will be inserted on page ii of the Prospectus Supplement, immediately following the second sentence of the first paragraph: Hotel properties will represent security for a material concentration of the Mortgage Loans in any Trust Fund, based on principal balance at the time such Trust Fund is formed. -2- VERSION 4: HOTEL PROPERTIES The following will be inserted in the Table of Contents of the Commercial Loan Prospectus, immediately following "Risk Factors--Risks Associated with Mortgage Loans and Mortgaged Properties": Risks Particular to Hotel Properties.........................[page no.] -3- VERSION 4: HOTEL PROPERTIES The following will be inserted in the Table of Contents of the Prospectus Supplement, immediately following "Description of the Mortgage Pool--General": Mortgage Loans Secured by Hotel Properties...................[page no.] -4- VERSION 4: HOTEL PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "RISK FACTORS," immediately following "Risks Associated with Mortgage Loans and Mortgaged Properties" and in the Prospectus Supplement under "RISK FACTORS," immediately following "Risks Associated with Certain of the Mortgage Loans and Mortgaged Properties": RISKS PARTICULAR TO HOTEL PROPERTIES Like any income producing property, the income generated by a hotel property is subject to several factors such as local, regional and national economic conditions and competition. However, because such income is primarily generated by room occupancy and such occupancy is usually for short periods of time, the level of such income may respond more quickly to conditions such as those described above. This daily mark-to-market also accentuates the highs and lows of economic cycles. Moreover, as a result of relatively high operating costs, relatively small decreases in revenue can cause significant stress on a property's cash flow. Also, sensitivity to competition may require more frequent improvements and renovations than other properties. To the extent a hotel is affiliated to, or associated with, a regional, national or international chain, changes in the public perception of such chain may have an impact on the income generated by the related property. Finally, the hotel industry is generally seasonal. This will result in fluctuation in the income generated by hotel properties. -5- VERSION 4: HOTEL PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "DESCRIPTION OF THE TRUST FUNDS," immediately following "Mortgage Loans--General" and in the Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL," immediately following "General": MORTGAGE LOANS SECURED BY HOTEL PROPERTIES Hotel properties may involve different types of hotels, including full service hotels, limited service hotels, hotels associated with national franchise chains, hotels associated with regional franchise chains and hotels that are not affiliated with any franchise chain but may have their own brand identity. Various factors, including location, quality and franchise affiliation affect the economic performance of a hotel. Adverse economic conditions, either local, regional or national, may limit the amount that can be charged for a room and may result in a reduction in occupancy levels. The construction of competing hotels can have similar effects. To meet competition in the industry and to maintain economic values, continuing expenditures must be made for modernizing, refurbishing, and maintaining existing facilities prior to the expiration of their anticipated useful lives. Because hotel rooms generally are rented for short periods of time, hotels tend to respond more quickly to adverse economic conditions and competition than do other commercial properties. Furthermore, the financial strength and capabilities of the owner and operator of a hotel may have an impact on such hotel's quality of service and economic performance. Additionally, the hotel and lodging industry is generally seasonal in nature and this seasonality can be expected to cause periodic fluctuations in room and other revenues, occupancy levels, room rates and operating expenses. The demand for particular accommodations may also be affected by changes in travel patterns caused by changes in energy prices, strikes, relocation of highways, the construction of additional highways and other factors. The viability of any hotel property that is a franchise of a national or a regional hotel chain depends in part on the continued existence and financial strength of the franchisor, the public perception of the franchise service mark and the duration of the franchise licensing agreement. The transferability of franchise license agreements may be restricted and, in the event of a foreclosure on any such hotel property, the consent of the franchisor for the continued use the franchise license by the hotel property would be required. Conversely, a lender may be unable to remove a franchisor that it desires to replace following a foreclosure. Further, in the event of a foreclosure on a hotel property, it is unlikely that the purchaser (or the trustee, servicer or special servicer, as the case may be) of such hotel property may be entitled to the rights under any liquor license for such hotel property, and such party would be required to apply in its own right for such license or licenses. There can be no assurance that a new license could be obtained or that it could be obtained promptly. -6- VERSION 5: HEALTH CARE-RELATED FACILITIES PROSPECTUS ICIFC SECURED ASSETS CORP. Depositor PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). Health care-related facilities will represent security for a material concentration of the Mortgage Loans (or the mortgage loans underlying the CMBS) in any Trust Fund, based on principal balance at the time such Trust Fund is formed. If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) --------------------------------- PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 VERSION 5: HEALTH CARE-RELATED FACILITIES The following will be inserted on page ii of the Prospectus Supplement, immediately following the second sentence of the first paragraph: Health care-related facilities will represent security for a material concentration of the Mortgage Loans in any Trust Fund, based on principal balance at the time such Trust Fund is formed. -2- VERSION 5: HEALTH CARE-RELATED FACILITIES The following will be inserted in the Table of Contents of the Commercial Loan Prospectus, immediately following "Risk Factors--Risks Associated with Mortgage Loans and Mortgaged Properties": Risks Particular to Health Care-Related Facilities...........[page no.] -3- VERSION 5: HEALTH CARE-RELATED FACILITIES The following will be inserted in the Table of Contents of the Prospectus Supplement, immediately following "Description of the Mortgage Pool--General": Mortgage Loans Secured by Health Care-Related Properties.....[page no.] -4- VERSION 5: HEALTH CARE-RELATED FACILITIES The following will be inserted in the Commercial Loan Prospectus under "RISK FACTORS," immediately following "Risks Associated with Mortgage Loans and Mortgaged Properties" and in the Prospectus Supplement under "RISK FACTORS," immediately following "Risks Associated with Certain of the Mortgage Loans and Mortgaged Properties": RISKS PARTICULAR TO HEALTH CARE-RELATED PROPERTIES Certain types of health care-related facilities (including nursing homes) typically receive a substantial portion of their revenues from government reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare are subject to statutory and regulatory changes, retroactive rate adjustments, administrative rulings, policy interpretations, delays by fiscal intermediaries and government funding restrictions, all of which can adversely affect revenues from operation. Moreover, governmental payors have employed cost-containment measures that limit payments to health care providers and there are currently under consideration various proposals for national health care relief that could further limit these payments. In addition, providers of long-term nursing care and other medical services are highly regulated by federal, state and local law and are subject to, among other things, federal and state licensing requirements, facility inspections, rate setting, reimbursement policies, and laws relating to the adequacy of medical care, distribution of pharmaceuticals, equipment, personnel operating policies and maintenance of and additions to facilities and services, any or all of which factors can increase the cost of operation, limit growth and in extreme cases, require or result in suspension or cessation of operations. Under applicable federal and state laws and regulations, Medicare and Medicaid reimbursements are generally not permitted to be made to any person other than the provider who actually furnished the related medical goods and services. Accordingly, in the event of foreclosure on a Mortgaged Property that is operated as a health care-related facility, none of the Trustee, the Special Servicer or a subsequent lessee or operator of the Mortgaged Property would generally be entitled to obtain from federal or state governments any outstanding reimbursement payments relating to services furnished at the respective Mortgaged Properties prior to such foreclosure. Furthermore, in the event of foreclosure, there can be no assurance that the Trustee (or Special Servicer) or purchaser in a foreclosure sale would be entitled to the rights under any required licenses and regulatory approvals and such party may have to apply in its own right for such licenses and approvals. There can be no assurance that a new license could be obtained or that a new approval would be granted. In addition, health care-related facilities are generally "special purpose" properties that could not be readily converted to general residential, retail or office use, and transfers of health care-related facilities are subject to regulatory approvals under state, and in some cases federal, law not required for transfers of other types of commercial operations and other types of real estate, all of which may adversely affect the liquidation value. -5- VERSION 5: HEALTH CARE-RELATED FACILITIES The following will be inserted in the Commercial Loan Prospectus under "DESCRIPTION OF THE TRUST FUNDS," immediately following "Mortgage Loans--General" and in the Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL," immediately following "General": MORTGAGE LOANS SECURED BY HEALTH CARE-RELATED PROPERTIES The Mortgaged Properties may include Senior Housing, Assisted Living Facilities, Skilled Nursing Facilities and Acute Care Facilities (any of the foregoing, "Health Care-Related Facilities"). "Senior Housing" generally consist of facilities with respect to which the residents are ambulatory, handle their own affairs and typically are couples whose children have left the home and at which the accommodations are usually apartment style. "Assisted Living Facilities" are typically single or double room occupancy, dormitory-style housing facilities which provide food service, cleaning and some personal care and with respect to which the tenants are able to medicate themselves but may require assistance with certain daily routines. "Skilled Nursing Facilities" provide services to post trauma and frail residents with limited mobility who require extensive medical treatment. "Acute Care Facilities" generally consist of hospital and other facilities providing short-term, acute medical care services. Certain types of Health Care-Related Facilities, particularly Acute Care Facilities, Skilled Nursing Facilities and some Assisted Living Facilities, typically receive a substantial portion of their revenues from government reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare are subject to statutory and regulatory changes, retroactive rate adjustments, administrative rulings, policy interpretations, delays by fiscal intermediaries and government funding restrictions. Moreover, governmental payors have employed cost-containment measures that limit payments to health care providers, and there exist various proposals for national health care reform that could further limit those payments. Accordingly, there can be no assurance that payments under government reimbursement programs will, in the future, be sufficient to fully reimburse the cost of caring for program beneficiaries. If such payments are insufficient, net operating income of those Health Care-Related Facilities that receive revenues from those sources, and consequently the ability of the related borrowers to meet their obligations under any Mortgage Loans secured thereby, could be adversely affected. Moreover, Health Care-Related Facilities are generally subject to federal and state laws that relate to the adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies and additions to facilities and services. In addition, facilities where such care or other medical services are provided are subject to periodic inspection by governmental authorities to determine compliance with various standards necessary to continued licensing under state law and continued participation in the Medicaid and Medicare reimbursement programs. Providers of assisted living services are also subject to state licensing requirements in certain states. The failure of an operator to maintain or renew any required license or regulatory approval could prevent it from continuing operations at a Health Care-Related Facility or, if applicable, bar it from participation in government reimbursement programs. Furthermore, under applicable federal and state laws and regulations, Medicare and Medicaid reimbursements are generally not permitted to be made to any person other than the provider who actually furnished the related medical goods and services. Accordingly, in the event of foreclosure, none of the Trustee, the Master Servicer, the Special Servicer or a subsequent lessee or operator of any Health Care-Related Facility securing a defaulted Mortgage Loan (a "Health Care-Related Mortgaged Property") would generally be entitled to obtain from federal or state governments any outstanding reimbursement payments relating to services furnished at such property prior to such foreclosure. Any of the aforementioned events may adversely affect the ability of the related borrowers to meet their Mortgage Loan obligations. Government regulation applying specifically to Acute Care Facilities, Skilled Nursing Facilities and certain types of Assisted Living Facilities includes health planning legislation, enacted by most states, intended, at least in part, to regulate the supply of nursing beds. The most common method of control is the requirement that a state authority first make a determination of need, evidenced by its issuance of a Certificate of Need ("CON"), before a long-term care provider can establish a new facility, add beds to an existing facility or, in some states, take certain other actions (for example, acquire major medical equipment, make major capital expenditures, add services, refinance long-term debt, or transfer ownership of a facility). States also regulate nursing bed supply in other ways. For example, some states have imposed moratoria on the licensing of new beds, or on the certification of new Medicaid beds, or have discouraged the construction of new nursing facilities by limiting Medicaid reimbursements allocable to the cost of new construction and equipment. In general, a CON is site specific and operator specific; it cannot be transferred from one site to another, or to another operator, without the approval of the appropriate state agency. Accordingly, if a Mortgage Loan secured by a lien on such a Health Care-Related Mortgaged Property were foreclosed upon, the purchaser at -6- VERSION 5: HEALTH CARE-RELATED FACILITIES foreclosure might be required to obtain a new CON or an appropriate exemption. In addition, compliance by a purchaser with applicable regulations may in any case require the engagement of a new operator and the issuance of a new operating license. Upon a foreclosure, a state regulatory agency may be willing to expedite any necessary review and approval process to avoid interruption of care to a facility's residents, but there can be no assurance that any will do so or that any necessary licenses or approvals will be issued. Further government regulation applicable to Health Care-Related Facilities is found in the form of federal and state "fraud and abuse" laws that generally prohibit payment or fee-splitting arrangements between health care providers that are designed to induce or encourage the referral of patients to, or the recommendation of, a particular provider for medical products or services. Violation of these restrictions can result in license revocation, civil and criminal penalties, and exclusion from participation in Medicare or Medicaid programs. The state law restrictions in this area vary considerably from state to state. Moreover, the federal anti-kickback law includes broad language that potentially could be applied to a wide range of referral arrangements, and regulations designed to create "safe harbors" under the law provide only limited guidance. Accordingly, there can be no assurance that such laws will be interpreted in a manner consistent with the practices of the owners or operators of the Health Care-Related Mortgaged Properties that are subject to such laws. The operators of Health Care-Related Facilities are likely to compete on a local and regional basis with others that operate similar facilities, some of which competitors may be better capitalized, may offer services not offered by such operators, or may be owned by non-profit organizations or government agencies supported by endowments, charitable contributions, tax revenues and other sources not available to such operators. The successful operation of a Health Care-Related Facility will generally depend upon the number of competing facilities in the local market, as well as upon other factors such as its age, appearance, reputation and management, the types of services it provides and, where applicable, the quality of care and the cost of that care. The inability of a Health Care-Related Mortgaged Property to flourish in a competitive market may increase the likelihood of foreclosure on the related Mortgage Loan, possibly affecting the yield on one or more classes of the related series of Offered Certificates. -7- VERSION 6: INDUSTRIAL PROPERTIES PROSPECTUS ICIFC SECURED ASSETS CORP. Depositor PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). Industrial properties will represent security for a material concentration of the Mortgage Loans (or the mortgage loans underlying the CMBS) in any Trust Fund, based on principal balance at the time such Trust Fund is formed. If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) --------------------------------- PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 VERSION 6: INDUSTRIAL PROPERTIES The following will be inserted on page ii of the Prospectus Supplement, immediately following the second sentence of the first paragraph: Industrial properties will represent security for a material concentration of the Mortgage Loans in any Trust Fund, based on principal balance at the time such Trust Fund is formed. -2- VERSION 6: INDUSTRIAL PROPERTIES The following will be inserted in the Table of Contents of the Commercial Loan Prospectus, immediately following "Risk Factors--Risks Associated with Mortgage Loans and Mortgaged Properties": Risks Particular to Industrial Properties....................[page no.] -3- VERSION 6: INDUSTRIAL PROPERTIES The following will be inserted in the Table of Contents of the Prospectus Supplement, immediately following "Description of the Mortgage Pool--General": Mortgage Loans Secured by Industrial Properties..............[page no.] -4- VERSION 6: INDUSTRIAL PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "RISK FACTORS," immediately following "Risks Associated with Mortgage Loans and Mortgaged Properties" and in the Prospectus Supplement under "RISK FACTORS," immediately following "Risks Associated with Certain of the Mortgage Loans and Mortgaged Properties": RISKS PARTICULAR TO INDUSTRIAL PROPERTIES Industrial properties may be adversely affected by reduced demand for industrial space occasioned by a decline in a particular industry segment, and an industrial property that suited the particular needs of its original tenant may be difficult to relet to another tenant or may become functionally obsolete relative to newer properties. Furthermore, industrial properties may be adversely affected by the availability of labor sources or a change in the proximity of supply sources. -5- VERSION 6: INDUSTRIAL PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "DESCRIPTION OF THE TRUST FUNDS," immediately following "Mortgage Loans--General" and in the Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL," immediately following "General": MORTGAGE LOANS SECURED BY INDUSTRIAL PROPERTIES Significant factors determining the value of industrial properties are the quality of tenants, building design and adaptability, the functionality of the finish-out and the location of the property. Concerns about the quality of tenants, particularly major tenants, are similar in both office properties and industrial properties, although industrial properties are more frequently dependent on a single tenant. Aspects of building site, design and adaptability affect the value of an industrial property. Site characteristics which are valuable to an industrial property include clear heights, column spacing, number of bays and bay depths, divisibility, floor loading capacities, truck turning radius and overall functionality and accessibility. Nevertheless, site characteristics of an industrial property suitable for one tenant may not be appropriate for other potential tenants, which may make it difficult to relet the property. Location is also important because an industrial property requires the availability of labor sources, proximity to supply sources and customers and accessibility to rail lines, major roadways and other distribution channels. Further, industrial properties may be adversely affected by economic declines in the industry segment of their tenants. -6- VERSION 7: SELF-STORAGE FACILITIES PROSPECTUS ICIFC SECURED ASSETS CORP. DEPOSITOR PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). Self-storage facilities will represent security for a material concentration of the Mortgage Loans (or the mortgage loans underlying the CMBS) in any Trust Fund, based on principal balance at the time such Trust Fund is formed. If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) --------------------------------- PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 VERSION 7: SELF-STORAGE FACILITIES The following will be inserted on page ii of the Prospectus Supplement, immediately following the second sentence of the first paragraph: Self-storage facilities will represent security for a material concentration of the Mortgage Loans in any Trust Fund, based on principal balance at the time such Trust Fund is formed. -2- VERSION 7: SELF-STORAGE FACILITIES The following will be inserted in the Table of Contents of the Commercial Loan Prospectus, immediately following "Risk Factors--Risks Associated with Mortgage Loans and Mortgaged Properties": Risks Particular to Self-Storage Facilities..................[page no.] -3- VERSION 7: SELF-STORAGE FACILITIES The following will be inserted in the Table of Contents of the Prospectus Supplement, immediately following "Description of the Mortgage Pool--General": Mortgage Loans Secured by Self-Storage Facilities............[page no.] -4- VERSION 7: SELF-STORAGE FACILITIES The following will be inserted in the Commercial Loan Prospectus under "RISK FACTORS," immediately following "Risks Associated with Mortgage Loans and Mortgaged Properties" and in the Prospectus Supplement under "RISK FACTORS," immediately following "Risks Associated with Certain of the Mortgage Loans and Mortgaged Properties": RISKS PARTICULAR TO SELF-STORAGE FACILITIES Self-storage properties are considered vulnerable to competition because both acquisition costs and break-even occupancy are relatively low. The conversion of self-storage facilities to alternative uses would generally require substantial capital expenditures. Thus, if the operation of any of the self-storage Mortgaged Properties becomes unprofitable due to decreased demand, competition, age of improvements or other factors such that the borrower becomes unable to meet its obligation on the related Mortgage Loan, the liquidation value of that self-storage Mortgaged Property may be substantially less, relative to the amount owing on the Mortgage Loan, than would be the case if the self-storage Mortgaged Property were readily adaptable to other uses. Tenant privacy, anonymity and efficient access may heighten environmental risks. The environmental assessments discussed herein did not include an inspection of the contents of the self-storage units included in the self-storage Mortgaged Properties and there is no assurance that all of the units included in the self-storage Mortgaged Properties are free from hazardous substances or other pollutants or contaminants or will remain so in the future; however, substantially all of the lease agreements used in connection with such Mortgaged Properties prohibit the storage of hazardous substances, pollutants or contaminants. -5- VERSION 7: SELF-STORAGE FACILITIES The following will be inserted in the Commercial Loan Prospectus under "DESCRIPTION OF THE TRUST FUNDS," immediately following "Mortgage Loans--General" and in the Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL," immediately following "General": MORTGAGE LOANS SECURED BY SELF-STORAGE FACILITIES Because of relatively low acquisition costs and break-even occupancy rates, self-storage facilities are considered vulnerable to competition. Despite their low acquisition costs, and because of their particular building characteristics, self-storage facilities would require substantial capital investments in order to adapt them to alternative uses. Such constraint in adaptability to other uses may substantially reduce the liquidation value of a self-storage mortgaged property. In addition to competition, other factors that affect the success of a self-storage facility, and thus the ability of the borrower to meet its obligations on the related mortgage loan, include the location and visibility of the facility, its proximity to apartment complexes or commercial users, trends of apartment tenants in the area moving to single-family homes, services provided (such as security and accessibility), age of improvements, the appearance of the improvements and the quality of management. -6- VERSION 8: MOBILE HOME PARKS PROSPECTUS ICIFC SECURED ASSETS CORP. DEPOSITOR PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). Mobile home parks will represent security for a material concentration of the Mortgage Loans (or the mortgage loans underlying the CMBS) in any Trust Fund, based on principal balance at the time such Trust Fund is formed. If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) --------------------------------- PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 VERSION 8: MOBILE HOME PARKS The following will be inserted on page ii of the Prospectus Supplement, immediately following the second sentence of the first paragraph: Mobile home parks will represent security for a material concentration of the Mortgage Loans in any Trust Fund, based on principal balance at the time such Trust Fund is formed. -2- VERSION 8: MOBILE HOME PARKS The following will be inserted in the Table of Contents of the Commercial Loan Prospectus, immediately following "Risk Factors--Risks Associated with Mortgage Loans and Mortgaged Properties": Risks Particular to Mobile Home Parks........................[page no.] -3- VERSION 8: MOBILE HOME PARKS The following will be inserted in the Table of Contents of the Prospectus Supplement, immediately following "Description of the Mortgage Pool--General": Mortgage Loans Secured by Mobile Home Parks..................[page no.] -4- VERSION 8: MOBILE HOME PARKS The following will be inserted in the Commercial Loan Prospectus under "RISK FACTORS," immediately following "Risks Associated with Mortgage Loans and Mortgaged Properties" and in the Prospectus Supplement under "RISK FACTORS," immediately following "Risks Associated with Certain of the Mortgage Loans and Mortgaged Properties": RISKS PARTICULAR TO MOBILE HOME PARKS The successful operation of a Mortgaged Property operated as a mobile home park will generally depend upon the number of competing mobile home parks and other residential developments in the local market, as well as upon other factors such as its age, appearance, reputation, management and the types of services it provides. Mobile home parks are "special purpose" properties that could not be readily converted to general residential, retail or office use. Thus, if the operation of any of the Mortgaged Properties constituting mobile home parks becomes unprofitable due to competition, age of the improvements or other factors such that the borrower becomes unable to meet its obligations on the related Mortgage Loan, the liquidation value of that Mortgaged Property may be substantially less, relative to the amount owing on the Mortgage Loan, than would be the case if the Mortgaged Property were readily adaptable to other uses. -5- VERSION 8: MOBILE HOME PARKS The following will be inserted in the Commercial Loan Prospectus under "DESCRIPTION OF THE TRUST FUNDS," immediately following "Mortgage Loans--General" and in the Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL," immediately following "General": MORTGAGE LOANS SECURED BY MOBILE HOME PARKS For purposes of this discussion, mobile home parks may include mobile home parks, recreational vehicle parks or combinations thereof. Loans secured by liens on properties of these types are affected by factors not associated with loans secured by liens on other types of income-producing real estate. The successful operation of a mobile home park will generally depend upon the number of competing mobile home parks and other residential developments in the local market (such as apartment buildings, other manufactured housing communities and site-built single family homes), as well as upon other factors such as its age, appearance, reputation, the ability of management to provide adequate maintenance and insurance, and the types of services it provides. Mobile home parks are "special purpose" properties that could not 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 that mobile home park may be substantially less, relative to the amount owing on the mortgage loan, than would be the case if the mobile home 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 permit vacancy decontrol, or permit vacancy decontrol only in the relatively rare event that the mobile home is removed from the homesite. Local authority to impose rent control on mobile home parks is preempted by state law in certain states, and rent control is not imposed at the state level in those states. In some states, however, local rent control ordinances are not preempted for tenants having short-term or month-to-month leases, and properties there may be subject to various forms of rent control with respect to those tenants. Any limitations on a borrower's ability to raise property rents may impair such borrower's ability to repay its mortgage loan from its net operating income or the proceeds of a sale or refinancing of the related mortgaged property. -6- VERSION 9: CONDOMINIUM PROPERTIES PROSPECTUS ICIFC SECURED ASSETS CORP. DEPOSITOR PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). Condominium properties will represent security for a material concentration of the Mortgage Loans (or the mortgage loans underlying the CMBS) in any Trust Fund, based on principal balance at the time such Trust Fund is formed. If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) --------------------------------- PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 VERSION 9: CONDOMINIUM PROPERTIES The following will be inserted on page ii of the Prospectus Supplement, immediately following the second sentence of the first paragraph: Condominium properties will represent security for a material concentration of the Mortgage Loans in any Trust Fund, based on principal balance at the time such Trust Fund is formed. -2- VERSION 9: CONDOMINIUM PROPERTIES The following will be inserted in the Table of Contents of the Commercial Loan Prospectus, immediately following "Risk Factors--Risks Associated with Mortgage Loans and Mortgaged Properties": Risks Particular to Condominium Properties...................[page no.] -3- VERSION 9: CONDOMINIUM PROPERTIES The following will be inserted in the Table of Contents of the Prospectus Supplement, immediately following "Description of the Mortgage Pool--General": Mortgage Loans Secured by Condominium Properties.............[page no.] -4- VERSION 9: CONDOMINIUM PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "RISK FACTORS," immediately following "Risks Associated with Mortgage Loans and Mortgaged Properties" and in the Prospectus Supplement under "RISK FACTORS," immediately following "Risks Associated with Certain of the Mortgage Loans and Mortgaged Properties": RISKS PARTICULAR TO CONDOMINIUM PROPERTIES With respect to Mortgage Loans secured by units in a condominium project, the related Mortgagor initially controls the owner's association related to the condominium project securing such loans, either by voting preference or numerical majority. However, with the sale of the individual condominium units, the Mortgagor will eventually relinquish voting control over the condominium association. Without voting control of the owner's association, the Mortgagor may be limited in its ability to direct the operation of the Mortgaged Property and to make improvements to common areas that may be necessary or desirable to enhance the marketability of the remaining units or otherwise preserve the Mortgaged Property. The value of the condominium units securing the Mortgage Loans could be adversely affected if and when the Mortgagor no longer possesses such control rights, and the value of the Mortgagor's security would be likewise affected. Additionally, all Mortgage Loans related to a single condominium project are generally cross-collateralized and cross-defaulted. Thus, if the Mortgagor is unable to make timely payments, all related Mortgage Loans will become defaulted Mortgage Loans at the same time. -5- VERSION 9: CONDOMINIUM PROPERTIES The following will be inserted in the Commercial Loan Prospectus under "DESCRIPTION OF THE TRUST FUNDS," immediately following "Mortgage Loans--General" and in the Prospectus Supplement under "DESCRIPTION OF THE MORTGAGE POOL," immediately following "General": MORTGAGE LOANS SECURED BY CONDOMINIUMS Mortgage Loans secured by condominium properties are typically pooled in connection with a distinct condominium development project. All such Mortgage Loans related to a single project are generally cross-collateralized and cross-defaulted with each other. Such Mortgage Loans are typically made to provide financing to single asset borrowers to refurbish existing projects that have an active sales program. While the financing is provided on a long-term, fully-amortizing basis, the project's sales program is evaluated with the objective of obtaining sales of all individual condominium units over a short-term period. Upon completion of the improvements, the units in the condominium properties will be sold to third-party purchasers and the related Mortgage Loans will be paid off with the proceeds. The single asset entity that is the Mortgagor on each pool of Mortgage Loans for a particular condominium project generally makes only one monthly payment representing the entire monthly payment on all of the related Mortgage Loans. Failure to make such payment will result in a default on all of the related Mortgage Loans to such entity. Significant factors determining the value and successful operation of a condominium project are the location of the property, the number of competing residential developments in the local market (such as apartment buildings, manufactured housing communities, site-built single family homes and other condominium projects), the physical attributes of the condominium (such as its age and appearance) and state and local regulations affecting such property. The ability of the Mortgagor to repay these Mortgage Loans will likely be dependent on the ability of such Mortgagor to sell the individual condominium units to a third party purchaser. The ability of the Mortgagor to sell the individual units may be affected by construction of additional housing units, local or regional economic factors and national and local politics. The location and construction quality of a particular building may affect the marketability and price charged for individual units. The characteristics of a neighborhood may change over time or in relation to newer developments. -6- PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED ___________________, 1998) $------------------- (Approximately) ICIFC SECURED ASSETS CORP. DEPOSITOR PASS-THROUGH CERTIFICATES, SERIES 199___-___ The Series 199___-___ Pass-Through Certificates (the "CERTIFICATES") will include the following classes of Certificates, designated as the Class A1, Class A1X, Class A2, Class A2X, Class B, Class C, Class BCX, Class D and Class E Certificates (the "OFFERED CERTIFICATES"). In addition to the Offered Certificates, the Certificates will also include the Class F, Class G, Class NR, Class R-I, Class R-II and Class R-III Certificates. Only the Offered Certificates are offered hereby. (COVER CONTINUED ON NEXT PAGE) THE YIELD TO MATURITY ON THE OFFERED CERTIFICATES WILL DEPEND ON THE RATE AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING PREPAYMENTS, DEFAULTS AND LIQUIDATIONS) ON THE MORTGAGE LOANS. THE YIELD TO MATURITY ON EACH CLASS OF OFFERED CERTIFICATES WILL BE SENSITIVE TO LOSSES DUE TO DEFAULTS ON THE MORTGAGE LOANS (AND THE TIMING THEREOF), TO THE EXTENT THAT SUCH LOSSES ARE NOT COVERED BY ANY CLASS OF CERTIFICATES HAVING A LOWER PAYMENT PRIORITY, AS DESCRIBED HEREIN. THE YIELD TO INVESTORS ON THE INTEREST ONLY CERTIFICATES WILL BE SENSITIVE TO THE RATE AND TIMING OF PREPAYMENTS, DEFAULTS AND LIQUIDATIONS ON THE MORTGAGE LOANS. THE RATES OF PREPAYMENT, DEFAULTS AND LIQUIDATIONS ON THE MORTGAGE LOANS MAY FLUCTUATE SIGNIFICANTLY OVER TIME. AN EXTREMELY RAPID RATE OF PREPAYMENT, DEFAULTS AND LIQUIDATIONS ON THE MORTGAGE LOANS COULD RESULT IN THE FAILURE OF INVESTORS IN THE INTEREST ONLY CERTIFICATES TO RECOVER THEIR INITIAL INVESTMENTS. SEE "SUMMARY -- SPECIAL PRINCIPAL PAYMENT CONSIDERATIONS" AND "--SPECIAL YIELD CONSIDERATIONS", AND "CERTAIN PREPAYMENT, MATURITY AND YIELD CONSIDERATIONS" HEREIN AND "YIELD CONSIDERATIONS" IN THE PROSPECTUS. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE S-___ HEREIN AND PAGE ____ IN THE PROSPECTUS BEFORE PURCHASING ANY OFFERED CERTIFICATES. -----------------------------
INITIAL CLASS BALANCE(1) PASS-THROUGH RATE (2) Class A1.............................. $__________________ __________% Class A1X............................. $__________________ Weighted Average Pass-Through Rate(3) Class A2.............................. $__________________ __________% Class A2X............................. $__________________ Weighted Average Pass-Through Rate(3) Class B............................... $__________________ Weighted Average Pass-Through Rate Class C............................... $__________________ Weighted Average Pass-Through Rate Class BCX............................. $__________________ (3)(4) Class D............................... $__________________ Weighted Average Pass-Through Rate Class E............................... $__________________ Weighted Average Pass-Through Rate
(1) Subject to a permitted variance of plus or minus 0.1%. (2) In addition to distributions of interest and/or principal, holders of the Certificates will be entitled to receive a portion of any Prepayment Premiums as described herein. (3) Based on the related Notional Amount as described herein. (4) Calculated based on the Pass-Through Rates of two components. The Pass-Through Rate on the Class BCX component B (as defined herein) is __________% and on the Class BCX component C (as defined herein) is ___________%. The Offered Certificates will be purchased from the Depositor by ______________________(the "UNDERWRITER") and will be offered by the Underwriter from time to time in negotiated transactions or otherwise at varying prices to be determined at the time of sale. Proceeds to the Depositor from the sale of the Offered Certificates, before deducting expenses payable by the Depositor estimated to be approximately $__________, will be ___% of the initial aggregate principal balance of the Offered Certificates as of __________, 199___ (the "CUT-OFF DATE"), plus accrued interest from the Cut-off Date. The Offered Certificates are offered by the Underwriter subject to prior sale, when, as and if delivered to and accepted by the Underwriter and subject to certain other conditions. It is expected that the Offered Certificates will be delivered in book-entry form through the Same-Day Funds Settlement System of DTC on or about ___________, 199___ (the "DELIVERY DATE"), against payment therefor in immediately available funds. The date of this Prospectus Supplement is ______________, 199____ (CONTINUED FROM PREVIOUS PAGE) The Certificates will represent in the aggregate the entire beneficial interest in a trust fund (the "TRUST FUND") to be established by ICIFC Secured Assets Corp. (the "DEPOSITOR"). The Trust Fund will consist primarily of a pool (the "MORTGAGE POOL") of fixed rate mortgage loans with original terms to maturity of not more than 300 months (such mortgage loans are referred to collectively herein as the "MORTGAGE LOANS"), secured by first liens on fee simple or leasehold interests in multifamily, retail, hotel, office, industrial, and other commercial properties. The Mortgage Loans were originated by several institutions identified herein (collectively, the "ORIGINATORS"), acquired by an affiliate of the Depositor and will be sold to the Depositor on or prior to the date of initial issuance of the Certificates. Distributions on the Certificates will be made, to the extent of available funds, on the 25th day of each month or, if any such day is not a business day, on the next succeeding business day, beginning in ___________ 199___ (each, a "DISTRIBUTION DATE"). As more fully described herein, distributions allocable to interest, if any, on the Offered Certificates on each Distribution Date will be based on the then applicable pass-through rate (the "PASS-THROUGH RATE") and the aggregate principal balance (the "CLASS BALANCE") (or the related notional balance (the "NOTIONAL AMOUNT") in the case of the Class A1X and Class A2X Certificates and each component of the Class BCX Certificates (each such class, the "INTEREST ONLY CERTIFICATES")) of such class or component outstanding immediately prior to such Distribution Date. The Pass-Through Rates applicable to the Class A1 and Class A2 Certificates and for each component of the Class BCX Certificates will be as set forth above. The Pass-Through Rates for the Class A1X, Class A2X, Class B, Class C, Class D and Class E Certificates will be variable and will be calculated as set forth herein. Distributions in respect of principal, if any, of the Certificates will be made as described herein under "Description of the Certificates -- Distributions" and "--Priority of Distributions". The Class A1, Class A2, Class A1X and Class A2X Certificates will evidence approximately an initial - ---% undivided interest in the Trust Fund. The Class B and Class BCX component B (as defined herein) will evidence approximately an initial ___% undivided interest in the Trust Fund. The Class C and Class BCX component C (as defined herein) will evidence approximately an initial ___% undivided interest in the Trust Fund. The Class D Certificates will evidence approximately an initial ___% undivided interest in the Trust Fund. The Class E Certificates will evidence approximately an initial ___% undivided interest in the Trust Fund. It is a condition of the issuance of the Class A1 and Class A2 Certificates that they be rated "____" by_____________________________________ ("__________") and _______________________ ("------------"). It is a condition of the issuance of the Class A1X and Class A2X Certificates that they be rated "___" by ----------- and "____" by ___________________. It is a condition of the issuance of the Class B Certificates that they be rated not lower than "___" by ________________ and ________________ . It is a condition of the issuance of the Class C Certificates that they be rated not lower than "___" by ________________ and "__" by ________________ . It is a condition of the issuance of the Class BCX Certificates that they be rated not lower than "___" by _____________. It is a condition of the issuance of the Class D Certificates that they be rated not lower than "___" by ---------------- and ________________ . It is a condition of the issuance of the Class E Certificates that they be rated not lower than "____" by ________________ and ________________ . The ratings by ________________ on the Interest Only Certificates do not address any prepayment or loss scenarios with respect to the Mortgage Loans or the likelihood of receipt of Prepayment Premiums. See "Rating" herein. _________________________________ will act as master servicer (in such capacity, the "MASTER SERVICER") and as special servicer (in such capacity, the "SPECIAL SERVICER") of the Mortgage Loans. The obligations of the Master Servicer and the Special Servicer with respect to the Certificates will be limited to their contractual servicing obligations and the obligation under certain circumstances to make P&I Advances (as defined herein) to the Certificateholders. See "Servicing." It is possible that the Special Servicer or one or more of its affiliates may purchase a portion of the Class NR Certificates. (CONTINUED ON FOLLOWING PAGE) - ii - (CONTINUED FROM PREVIOUS PAGE) As described herein, three separate "real estate mortgage investment conduit" ("REMIC") elections will be made in connection with the Trust Fund for federal income tax purposes. The Certificates, other than the Class R-I, Class R-II and Class R-III Certificates, will constitute "regular interests" in the related REMIC and the Class R-I, Class R-II and Class R-III Certificates will constitute the sole class of "residual interest" in the related REMIC. See "Federal Income Tax Consequences" herein and in the Prospectus. The Offered Certificates initially will be represented by certificates registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), as further described herein. The interests of beneficial owners of the Offered Certificates will be represented by book entries on the records of participating members of DTC. Definitive certificates will be available for the Offered Certificates only under the limited circumstances described herein. See "Description of the Certificates -- Book-Entry Registration of the Offered Certificates" herein. PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE OFFERED CERTIFICATES DO NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, THE MASTER SERVICER, THE SPECIAL SERVICER, THE PRIMARY SERVICERS, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR AFFILIATES. NEITHER THE OFFERED CERTIFICATES NOR THE UNDERLYING MORTGAGE LOANS ARE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY THE DEPOSITOR, THE MASTER SERVICER, THE SPECIAL SERVICER, THE PRIMARY SERVICERS, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR AFFILIATES. See "Index of Principal Definitions" in the Prospectus for the location of meanings of capitalized terms used but not defined herein. See "Index of Principal Definitions" herein for location of meanings of other capitalized terms used herein. There is currently no secondary market for the Offered Certificates. The Underwriter currently expects to make a secondary market in the Offered Certificates, but has no obligation to do so. There can be no assurance that such a market will develop or, if it does develop, that it will continue. See "Method of Distribution" herein. THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION ABOUT THE OFFERING OF THE OFFERED CERTIFICATES. ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS, DATED _________________________ AND ATTACHED HERETO. PURCHASERS ARE URGED TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF THE CERTIFICATES OFFERED HEREBY MAY NOT BE CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. - iii - TABLE OF CONTENTS (CONTINUED) TABLE OF CONTENTS PAGE ---- SUMMARY OF PROSPECTUS SUPPLEMENT.................................S-1 RISK FACTORS....................................................S-12 DESCRIPTION OF THE MORTGAGE POOL................................S-20 General....................................................S-20 Representations and Warranties.............................S-21 Certain Characteristics of the Mortgage Loans.........................................S-29 Related Borrowers and Other Issues.........................S-39 Escrows....................................................S-39 Underwriting Guidelines....................................S-39 Additional Information.....................................S-39 DESCRIPTION OF THE CERTIFICATES.................................S-39 General....................................................S-39 Book-Entry Registration of the Offered Certificates..................................S-40 Distributions..............................................S-41 Priority of Distributions..................................S-43 Other Certificates.........................................S-44 Subordination..............................................S-44 Advances...................................................S-45 CERTAIN PREPAYMENT, MATURITY AND YIELD CONSIDERATIONS.......................................S-46 General....................................................S-46 Weighted Average Life of the Offered Certificates..................................S-47 Interest Only Certificates Yield Considerations..................................S-48 Class C, Class BCX, Class D and Class E Yield Considerations...........................S-50 SERVICING.......................................................S-50 Servicers..................................................S-50 Responsibilities of Master Servicer and Primary Servicer.......................................S-51 Responsibilities of Special Servicer.......................S-51 Extension Advisor..........................................S-53 Servicing and Other Compensation and Payment of Expenses....................................S-53 Conflicts of Interest......................................S-53 DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT........................................S-53 General....................................................S-53 Assignment of the Mortgage Loans...........................S-54 Trustee....................................................S-54 Collection Accounts and Certificate Account...............................................S-54 Reports to Certificateholders..............................S-55 Voting Rights..............................................S-55 Termination................................................S-55 USE OF PROCEEDS.................................................S-56 FEDERAL INCOME TAX CONSEQUENCES.................................S-56 STATE TAX CONSIDERATIONS........................................S-57 ERISA CONSIDERATIONS............................................S-57 LEGAL INVESTMENT................................................S-58 METHOD OF DISTRIBUTION..........................................S-59 LEGAL MATTERS...................................................S-60 RATING..........................................................S-60 INDEX OF PRINCIPAL DEFINITIONS..................................S-61 - iv - SUMMARY OF PROSPECTUS SUPPLEMENT The following summary is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus Supplement and in the accompanying Prospectus. CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT OR IN THE PROSPECTUS. See "Index of Principal Definitions" herein and in the Prospectus. Title of Certificates......... Pass-Through Certificates, Series 199___-____ (the "CERTIFICATES"). Depositor...................... ICIFC Secured Assets Corp., a California corporation (the "DEPOSITOR"), a wholly- owned limited purpose finance subsidiary of ICI Funding Corporation ("ICI FUNDING"). See "The Depositor" in the Prospectus. Originators.................... _____%, _____%, _____%, _____% and _____% of the Mortgage Loans by outstanding principal balance as of the Cut-off Date (as defined herein) were originated, respectively, by: (i) Imperial Commercial Capital ("ICCC"); (ii) ______________________, a ______________________________; (iii) _______________________, a ______________________________; and (iv) _____________________, a ______________________________. Master Servicer............... _____________________________. See "Servicing -- Servicers" and "Servicing -- Responsibilities of Master Servicer and Primary Servicer" herein. Primary Servicers............. The Primary Servicers are _________________________, with respect to each Mortgage Loan originated by _______________________ and _______________________________ with respect to all other Mortgage Loans. See "Servicing -- Servicers" and "Servicing -- Responsibilities of Master Servicer and Primary Servicer" herein. Special Servicer.............. _____________________________________, will be the Special Servicer with respect to all the Mortgage Loans. Trustee........................ ______________________________, a _________________ banking corporation. Custodian...................... _______________________________, a _____________ banking corporation, in its capacity as custodian for the Trustee (the "CUSTODIAN"). Cut-off Date.................. _________________ 1, 199___. Delivery Date................. On or about _________________, 199____. Distribution Dates............ Distributions on the Certificates will be made by the Trustee, to the extent of available funds, on the [25th] day of each month or, if any such [25th] day is not a business day, on the next succeeding business day, beginning in ________ 199__ (each, a "DISTRIBUTION DATE"), to the holders of record as of the close of business on the [last business day of the month preceding the month] of each such distribution (each, a "RECORD DATE"). Notwithstanding the above, the final distribution on any Certificate will be made after due notice by the Trustee of the pendency of such distribution and only upon presentation and surrender of such Certificates at the location to be specified in such notice. Rated Final Distribution Date........................... ________________, 20___, which is the second anniversary of the date at which all the Mortgage Loans have zero balances, assuming no prepayments and that the Mortgage Loans which are Balloon Mortgage Loans fully amortize according to their amortization schedule and no Balloon Payment is made. S-1 Registration of the Offered Certificates................... The Offered Certificates (the "DTC REGISTERED CERTIFICATES") will be represented by one or more global certificates registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"). No person acquiring an interest in the DTC Registered Certificates (any such person, a "BENEFICIAL OWNER") will be entitled to receive a Certificate of such class in fully registered, certificated form (a "DEFINITIVE CERTIFICATE"), except under the limited circumstances described in the Prospectus under "Description of the Certificates -- Book-Entry Registration and Definitive Certificates". Instead, DTC will effect payments and transfers in respect of the DTC Registered Certificates by means of its electronic record keeping services, acting through certain participating organizations ("PARTICIPANTS"). This may result in certain delays in receipt of payments by an investor and may restrict an investor's ability to pledge its securities. Unless and until Definitive Certificates are issued, the rights of Beneficial Owners may only be exercised through DTC and its Participants and will be subject to procedures established thereby, except as otherwise specified herein. See "Description of the Certificates-- General" herein and "Description of the Certificates-- Book-Entry Registration and Definitive Certificates" in the Prospectus. Denominations ................. The DTC Registered Certificates will be issuable on the book-entry records of DTC and its Participants in denominations of (except in the case of the Interest Only Certificates) $___________________ and integral multiples of $______ in excess thereof. The Interest Only Certificates will be issuable in denominations of $_________ Notional Amount and integral multiples of $_____ Notional Amount. The Mortgage Pool........... The Trust Fund will consist of a pool (the "MORTGAGE POOL") of ______ [fixed rate] [floating rate] [partially fixed rate and partially floating rate] mortgage loans (the "MORTGAGE LOANS") secured by first liens on fee simple or leasehold interests in multifamily, retail, hotel, health care-related, office, industrial and other commercial properties (the "MORTGAGED PROPERTIES") located in ____ states. See "Risk Factors-- Ground Leases and Other Leasehold Interests" herein. The Mortgage Loans were originated or acquired by ICCC and were underwritten generally in conformity with certain guidelines established by ICCC. See "Description of the Mortgage Pool-- General" herein. The Mortgage Loans will be acquired by the Depositor from ICCC on or before the Delivery Date. See "Description of the Mortgage Pool-- Underwriting Guidelines" herein. The Mortgage Loans will have an aggregate principal balance as of the Cut-off Date of approximately $_______________ and individual principal balances as of the Cut- off Date of at least $______________ but not more than $______________ with an average principal balance of approximately $______________. The Mortgage Loans will have terms to maturity from the Cut-off Date of not more than _____ months, and a weighted average remaining term to maturity of approximately _____ months as of the Cut-off Date. The Mortgage Loans will bear interest at Mortgage Interest Rates of at least ________% per annum but not more than ___________% per annum, with a weighted average Mortgage Interest Rate of approximately ___________% per annum as of the Cut-off Date. The Mortgage Loans provide for scheduled payments of principal and/or interest ("MONTHLY PAYMENTS") to be due on the first day of each month (the "DUE DATE"). Approximately ______% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date provide for monthly payments of principal based on an amortization schedule longer, and in some cases significantly longer, than the remaining term of such Mortgage Loan (each, a "BALLOON MORTGAGE LOAN"), S-2 thereby leaving a substantial outstanding principal amount due and payable (the "BALLOON PAYMENT") on its maturity date, unless prepaid prior thereto. Except in certain limited circumstances, each Mortgage Loan either prohibits voluntary prepayments during a certain number of years following the origination thereof and/or allows the borrower thereunder (the "MORTGAGOR") to prepay the principal balance thereof in whole or in part during a certain number of years following the origination if accompanied by payment of a premium (the "PREPAYMENT PREMIUM"). See Annex A hereto and the table entitled "Prepayment Lock-out/Prepayment Premium Analysis" under "Description of the Mortgage Pool -- Certain Characteristics of the Mortgage Loans" herein. Any Prepayment Premium collected on a Mortgage Loan will be distributed to the holders of the Certificates as described herein. See "Special Principal Payment Considerations" below, "Risk Factors -- Special Prepayment Considerations", "Description of the Certificates -- Distributions -- Interest Distributions on the Certificates" and "Certain Prepayment, Maturity and Yield Considerations" herein and "Yield Considerations" in the Prospectus. In connection with its acquisition of the Mortgage Loans, the Depositor will obtain certain representations from ICCC. ICCC will covenant with the Depositor to cure any breach of such representations and warranties or to repurchase any Mortgage Loan in connection with which there has been a breach of a representation or warranty which materially and adversely affects the interest of the Certificateholders in such Mortgage Loan. The Depositor will assign such representations and warranties and covenants to the Trustee under the Pooling and Servicing Agreement (as defined below). The sole remedy available to the Trustee or the Certificateholders is the obligation of ICCC to cure any such breach or repurchase any such Mortgage Loan. For a further description of the Mortgage Loans, see "Description of the Mortgage Pool" herein. The Offered Certificates.... The Certificates will be issued pursuant to a pooling and servicing agreement, to be dated as of the Cut-off Date, among the Depositor, the Master Servicer, the Special Servicer and the Trustee (the "POOLING AND SERVICING AGREEMENT"). The Offered Certificates will have the initial Class Balances set forth on the cover hereof. The Interest Only Certificates will not have Class Balances. The Class BCX Certificates consist of the following components: the Class BCX component B and the Class BCX component C (each a "COMPONENT"). The Class BCX component B and the Class BCX component C are not separately transferrable. Pass-Through Rate on the Certificates.................. The Pass-Through Rates on the Class A1 and Class A2 Certificates are fixed and are set forth on the cover hereof. The Pass-Through Rates on the Class A1X and Class A2X Certificates will be equal to the weighted average of the Remittance Rates in effect from time to time on the Mortgage Loans minus the Pass-Through Rates on the Class A1 and Class A2 Certificates, respectively. The Pass-Through Rates on the Class B and Class C Certificates will equal the weighted average of the Remittance Rates in effect from time to time on the Mortgage Loans minus the Pass-Through Rates on the Class BCX component B and the Class BCX component C, respectively. The Class BCX Certificates will be entitled to interest at the Pass-Through Rate on the components. The Pass- Through Rate on the Class BCX component B is ______% per annum and on the Class BCX component C is _______% per annum. The Pass-Through Rates on the Class D and Class E Certificates will equal the weighted average of the Remittance Rates in effect from time to time on the Mortgage Loans. The Remittance Rate in effect for any S-3 Mortgage Loan as of any date of determination is equal to the excess of the Mortgage Interest Rate thereon (without giving effect to any modification or reduction thereof following the Cut-off Date) over the sum of the related Servicing Fee Rate (as defined herein) and the fee payable to the Trustee. The Mortgage Interest Rate for each of the Mortgage Loans which provide for the computation of interest other than on the basis of a 360-day year consisting of twelve 30-day months (a "30/360 BASIS") (that is the basis on which interest on the Certificates accrues) will be adjusted to reflect that difference. Interest Distributions on the Certificates............. Subject to the distribution of the Principal Distribution Amount to the Holders of classes of Certificates of a higher priority as described under "Priority of Distributions" below, Holders of each class of Offered Certificates will be entitled to receive on each Distribution Date in the order described herein, to the extent of the Available Distribution Amount (as defined herein) for such Distribution Date (net of any interest accrued on any Collateral Value Adjustment subsequently recovered and any Net Prepayment Premium (both, as defined herein)) (the "ADJUSTED AVAILABLE DISTRIBUTION AMOUNT"), distributions allocable to interest in an amount (the "INTEREST DISTRIBUTION AMOUNT") equal to the interest accrued during the period from and including the first day of the month preceding the month of the Distribution Date (or from the Cut-off Date, in the case of the initial Distribution Date) to and including the last day of the month preceding the month of the Distribution Date (based on a 360-day year consisting of twelve 30-day months) on the related Class Balance (or the related Notional Amount, in the case of the Interest Only Certificates, or any component thereof) immediately prior to such Distribution Date at the then-applicable Pass-Through Rate (the "INTEREST ACCRUAL AMOUNT") less such class' (or component's) pro rata share, by Interest Accrual Amount, of any interest shortfall not related to a Mortgagor delinquency or default, such as Prepayment Interest Shortfalls to the extent not offset as described herein, and shortfalls associated with exemptions provided by the Relief Act (as defined in the Prospectus). The Notional Amount of the Class A1X Certificates will equal the Class Balance of the Class A1 Certificates. The Notional Amount of the Class A2X Certificates will equal the Class Balance of the Class A2 Certificates. The Notional Amount of the Class BCX component B will equal the Class Balance of the Class B Certificates. The Notional Amount of the Class BCX component C will equal the Class Balance of the Class C Certificates. A Notional Amount does not entitle the Interest Only Certificates to any distributions of principal. If the Adjusted Available Distribution Amount for any Distribution Date is less than the Interest Distribution Amount for such Distribution Date, the shortfall will be part of the Interest Distribution Amount distributable to holders of Offered Certificates on subsequent Distribution Dates, to the extent of available funds. In addition to the related Interest Distribution Amount, the Interest Only Certificates will receive ____% of any Net Prepayment Premium and the remaining Offered Certificates will receive ____% of any Net Prepayment Premium, as more fully described herein, to the extent not necessary to reimburse the Master Servicer for reductions in its compensation due to Prepayment Interest Shortfalls. See "-- Special Yield Considerations" below and "Description of the Certificates -- Distributions -- Interest Distributions on the Certificates" herein. The Available Distribution Amount for any Distribution Date generally includes: (i) scheduled payments on the Mortgage Loans due on or prior to the related Due Date immediately preceding, and collected as of, the related Determination Date (to the extent not distributed on previous Distribution Dates) and unscheduled payments and other collections on the Mortgage Loans collected during the related S-4 Remittance Period, net of amounts payable or reimbursable to the related Primary Servicer, the Master Servicer or the Special Servicer therefrom and (ii) any P&I Advances made by the Master Servicer, the Special Servicer, or the related Primary Servicer for the related Distribution Date. The "DETERMINATION DATE" for any Distribution Date is the 10th business day preceding such Distribution Date. The "REMITTANCE PERIOD" for any Distribution Date is the period beginning after a Determination Date in the immediately preceding month (or the Cut-off Date, in the case of the first Distribution Date) through the related Determination Date. See "Description of the Certificates -- Distributions -- Interest Distributions on the Certificates" herein. Principal Distributions on the Certificates.............. Holders of the Certificates will be entitled to receive on each Distribution Date in reduction of the related Class Balance in the order described herein until the related Class Balance is reduced to zero, to the extent of the balance of the Adjusted Available Distribution Amount remaining after the payment of the Interest Distribution Amount for such Distribution Date for the classes of Certificates with the highest priority of payment for interest payments (as described under "Priority of Distributions" below) distributions in respect of principal in an amount (the "PRINCIPAL DISTRIBUTION AMOUNT") equal to the aggregate of (i) all scheduled payments of principal (other than Balloon Payments) due on the Mortgage Loans on the related Due Date whether or not received and all scheduled Balloon Payments received, (ii) if the scheduled Balloon Payment is not received, with respect to any Balloon Mortgage Loans on and after the Maturity Date thereof, the principal payment that would need to be received in the related month in order to fully amortize such Balloon Mortgage Loan with level monthly payments by the end of the term used to derive scheduled payments of principal due prior to the related Maturity Date, (iii) to the extent not previously advanced, any unscheduled principal recoveries received during the related Remittance Period in respect of the Mortgage Loans, whether in the form of liquidation proceeds, insurance proceeds, condemnation proceeds or amounts received as a result of the purchase of any Mortgage Loan out of the Trust Fund to the extent not required to be otherwise applied pursuant to the terms of the related Mortgage Loan and (iv) any other portion of the Adjusted Available Distribution Amount remaining undistributed after payment of any interest payable on the Certificates, including any Prepayment Interest Excess (as defined herein) not offset by any Prepayment Interest Shortfall occurring during the related Remittance Period or otherwise required to reimburse the Master Servicer, as described herein, and interest distributions on the Mortgage Loans, in excess of interest distributions on the Certificates, resulting from the application of the amounts described in this clause (iv) to principal distributions on the Certificates. See "Description of the Certificates-- Distributions-- Principal Distributions on the Offered Certificates" herein. The Interest Only Certificates do not have a Class Balance and are therefore not entitled to any principal distributions. Priority of Distributions..... The Adjusted Available Distribution Amount for any Distribution Date will be applied (a) first, to distributions of interest on the classes of Certificates outstanding with highest priority for interest payment (as described below), (b) second, to distributions of the Principal Distribution Amount to the classes of Certificates then entitled to distributions of principal as described below, and (c) third, to distributions of interest on each class of Certificates other than the classes described in clause (a) above, in the order of priority described below; provided that on any Distribution Date on which the Class Balance of a class of Certificates is reduced to zero pursuant to clause (b) above, interest distributions pursuant to clause (a) above will be made to the class of Certificates outstanding with the next highest priority for interest payments prior to making distributions of S-5 the Principal Distribution Amount thereto pursuant to clause (b) above. The priority for interest payments for purposes of clauses (a) and (c), above, is: first to distributions of interest on the Class A1, Class A1X, Class A2 and Class A2X Certificates, pro rata, based on their respective Interest Accrual Amounts; second, to the Class B and Class BCX component B Certificates, pro rata, based on their respective Interest Accrual Amounts; third, to the Class C and the Class BCX component C Certificates, pro rata, based on their respective Interest Accrual Amounts; fourth, to the Class D Certificates; fifth, to the Class E Certificates; and then to the remaining classes of Certificates up to their respective Interest Accrual Amounts, all as described under "Interest Distributions on the Certificates" above. The Principal Distribution Amount for such Distribution Date will be applied to the payment of principal of the Class A1, Class A2, Class B, Class C, Class D and Class E Certificates, in that order, and then to the remaining classes of Certificates, until their respective Class Balances have been reduced to zero. Any Net Prepayment Premium for any Distribution Date will be applied to reimburse the Master Servicer for reductions in its compensation due to Prepayment Interest Shortfalls, as described herein, and then to distributions on the Certificates, as described herein. In addition, to the extent any amounts corresponding to a Collateral Value Adjustment are recovered on a Mortgage Loan, any interest accrued on any class of Certificates and not paid as a result of such Collateral Value Adjustment shall be allocated to such classes as described herein. See "Description of the Certificates -- Subordination" herein. P&I Advances .................. The Master Servicer, the Special Servicer and the Primary Servicers (each, a "SERVICER") are required to make advances ("P&I ADVANCES") for delinquent Monthly Payments on the Mortgage Loans, subject to the limitations described herein. None of the Servicers will be required to advance the full amount of any Balloon Payment not made by the related Mortgagor. To the extent a Servicer is required to make a P&I Advance on and after the Due Date for a Balloon Payment, such P&I Advance shall not exceed an amount equal to the monthly payment calculated by the Special Servicer necessary to fully amortize the related Mortgage Loan over the period used for purposes of calculating the scheduled monthly payments thereon prior to the related Maturity Date. As more fully described herein, each Servicer making a P&I Advance (or any other advance) will be entitled to reimbursement thereof and interest thereon at the prime rate determined in accordance with the Pooling and Servicing Agreement to the extent provided therein. See "Description of the Certificates -- Advances" herein and "Description of the Certificates -- Advances in Respect of Delinquencies" in the Prospectus. Other Certificates ............ The Class F, Class G, Class NR, Class R-I, Class R-II and Class R-III Certificates are not offered hereby (the "OTHER CERTIFICATES"). The Pass-Through Rates on the Class F, Class G and Class NR Certificates will equal the weighted average of the Remittance Rates in effect from time to time on the Mortgage Loans. The Class Balances on the Class F, Class G and Class NR Certificates will equal $______________, $_________________ and $________________, respectively, and approximately $_____________, in the aggregate. The Class R-I, Class R-II and Class R-III Certificates will not have a Pass-Through Rate or a Class Balance. Subordination ................. Neither the Offered Certificates nor the Mortgage Loans are insured or guaranteed against losses suffered on the Mortgage Loans by any government agency or instrumentality or by the Depositor, the Trustee, the Underwriter, the Master Servicer, the Special Servicer, the Primary Servicers, or any affiliate thereof. Realized Losses and Collateral Valuation Adjustments (as defined herein) on the Mortgage Loans will be allocated, first, to the Other Certificates, second, to the Class E Certificates, third, to the Class D Certificates, fourth, to the Class C S-6 Certificates, fifth to the Class B Certificates, and thereafter, to the Class A1 and Class A2 Certificates, on a pro rata basis, based on Class Balance, in each case until the related Class Balance is reduced to zero. Any allocation of a Realized Loss or a Collateral Valuation Adjustment to a class of Certificates will result in a reduction of the related Class Balance and the Notional Amount of any of the Interest Only Certificates (or component thereof) calculated by reference to such Class Balance. In addition, the Adjusted Available Distribution Amount will be applied in the order set forth under "Priority of Distributions" above. In addition to Realized Losses and Collateral Valuation Adjustments, shortfalls may also occur as a result of each Servicer's right to receive payments of interest with respect to unreimbursed advances, the Special Servicer's right to compensation with respect to Mortgage Loans which are or have been Specially Serviced Mortgage Loans and as a result of other Trust Fund expenses. Such shortfalls will be allocated to the classes of Certificates with the lowest payment priority for purposes of the application of the Adjusted Available Distribution Amount in the order described herein. Optional Termination .......... At its option, the Master Servicer, the Special Servicer, any holder of a Class R-I Certificate, the holders of an aggregate Percentage Interest in excess of 50% of the Most Subordinate Class of Certificates (as defined herein) and (to the extent all of the remaining Mortgage Loans are being serviced thereby as Primary Servicer) any Primary Servicer may purchase all of the Mortgage Loans, at the price set forth under "Description of the Pooling and Servicing Agreement-- Termination" herein, and thereby effect termination of the Trust Fund and early retirement of the then outstanding Certificates, on any Distribution Date on which the aggregate Stated Principal Balance (as defined herein) of the Mortgage Loans remaining in the Trust Fund is less than ____% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date. See "Description of the Pooling and Servicing Agreement-- Termination" herein and "Description of the Certificates -- Termination" in the Prospectus. Special Principal Payment Considerations ................ The rate and timing of principal payments, if any, on the Offered Certificates will depend, among other things, on the rate and timing of principal payments (including prepayments, defaults, liquidations and purchases of Mortgage Loans due to a breach of a representation and warranty) on the Mortgage Loans. As described herein, each of the Mortgage Loans prohibits, and/or requires the payment of a Prepayment Premium in connection with, any voluntary prepayment during certain specified times. See "The Mortgage Pool" above and "Description of the Mortgage Pool" herein. All classes of Offered Certificates entitled to payments of principal are subject to priorities for payment of principal as described herein. Distributions of principal on classes having an earlier priority of payment will be directly affected by the rates of prepayments of the Mortgage Loans. The timing of commencement of principal distributions and the weighted average lives of classes of Certificates with a later priority of payment will be affected by the rates of prepayments experienced both before and after the commencement of principal distributions on such classes. In addition, a portion of collections on the Mortgage Loan in excess of scheduled and unscheduled principal distributions will be allocated to the classes of Certificates then entitled to distributions of principal. Any such allocation may result in a faster amortization of such class of Certificates. Special Yield S-7 Considerations ................ The yield to maturity on each class of the Offered Certificates will depend on, among other things, the rate and timing of principal payments (including prepayments, defaults, liquidations and purchases of Mortgage Loans due to breaches of representations and warranties) on the Mortgage Loans and the allocation thereof to reduce the Class Balance or Notional Amount of such class (or component thereof). The yield to maturity on each class of the Offered Certificates will also depend on the Pass-Through Rate and the purchase price for such Certificates. The yield to investors on any class of Offered Certificates will be adversely affected by any allocation thereto of Prepayment Interest Shortfalls on the Mortgage Loans, which may result from the distribution of interest only to the date of a prepayment occurring during any month following the related Determination Date (rather than a full month's interest). See "Description of the Certificates-- Distributions-- Interest Distributions on the Certificates" herein. In general, if a class of Offered Certificates is purchased at a premium and principal distributions thereon occur at a rate faster than anticipated at the time of purchase, the investor's actual yield to maturity will be lower than that assumed at the time of purchase. Conversely, if a class of Offered Certificates is purchased at a discount and principal distributions thereon occur at a rate slower than that assumed at the time of purchase, the investor's actual yield to maturity will be lower than that assumed at the time of purchase. The multiple class structure of the Offered Certificates causes the yield of certain classes to be particularly sensitive to changes in the rates of principal payments (including prepayments, defaults, liquidations and purchases of Mortgage Loans due to a breach of a representation and warranty) of the Mortgage Loans and other factors. The yield to investors on the Interest Only Certificates will be sensitive to the rate and timing of prepayments, defaults and liquidations on the Mortgage Loans. The rate of such prepayments, defaults and liquidations on the Mortgage Loans may fluctuate significantly over time. A significantly faster than expected rate of such prepayments, defaults and liquidations on the Mortgage Pool will have a negative effect on the yield to such investors and could result in the failure of investors in the Interest Only Certificates to recover their initial investments. In addition, because holders of the Class A1X and A2X Certificates have rights to relatively larger portions of interest payments on Mortgage Loans with higher Mortgage Interest Rates than on Mortgage Loans with lower Mortgage Interest Rates, and because Mortgage Loans with higher Mortgage Interest Rates are generally likely to prepay at a faster rate than Mortgage Loans with lower Mortgage Interest Rates, the yield on the Class A1X and A2X Certificates will be materially adversely affected to a greater extent than the yields on the other Offered Certificates if the Mortgage Loans with higher Mortgage Interest Rates prepay faster than the Mortgage Loans with lower Mortgage Interest Rates. See "Certain Prepayment, Maturity and Yield Considerations," especially "--Interest Only Certificate Yield Considerations" herein. The yield to investors on any of the Certificates will be sensitive to losses due to defaults on the Mortgage Loans (and the timing thereof), because the amount of such losses will be allocable to such class to the extent such losses are not covered by a subordinate class of Certificates, as described herein. Furthermore, as described herein, the timing of receipt of principal and interest by any such class of Certificates may be adversely affected by losses even if such class does not ultimately bear such loss. S-8 Each Servicer making an advance will be entitled to interest thereon at the prime rate determined in accordance with the Pooling and Servicing Agreement to the extent provided therein. Therefore losses may be allocated to a class of Offered Certificates with respect to any delinquent Monthly Payment and certain other expenses advanced by such Servicer. The Special Servicer will be entitled to receive compensation in the form of a percentage of collections of any Mortgage Loan which is being serviced or has been serviced by the Special Servicer (a "SPECIALLY SERVICED MORTGAGE LOAN") prior to the right of Certificateholders to receive distributions on the Certificates. Such compensation will result in shortfalls which will be allocated to the classes of Certificates with the lowest payment priority for purposes of application of the Adjusted Available Distribution Amount in the order described herein. Consequently, it is possible that losses will be allocated to the Offered Certificates with respect to any Specially Serviced Mortgage Loan notwithstanding the fact that such Mortgage Loan is returned to a performing status. See "Servicing --Servicing and Other Compensation and Payment of Expenses" herein. See "Certain Prepayment, Maturity and Yield Considerations," especially "--Class C, Class BCX, Class D and Class E Yield Considerations" herein, and "Yield Considerations" in the Prospectus. Federal Income Tax Consequences .................. Three separate real estate mortgage investment conduit ("REMIC") elections will be made with respect to the Trust Fund for federal income tax purposes. Upon the issuance of the Offered Certificates, Andrews & Kurth L.L.P., counsel to the Depositor, will deliver its opinion generally to the effect that, assuming compliance with all provisions of the Pooling and Servicing Agreement, for federal income tax purposes, the REMIC I, REMIC II and REMIC III (each as defined in the Pooling and Servicing Agreement) will each qualify as a REMIC under Sections 860A through 860G of the Internal Revenue Code of 1986 (the "CODE"). For federal income tax purposes, the Class R-I Certificates will be the sole class of "residual interests" in REMIC I, the Class R-II Certificates will be the sole class of "residual interests" in REMIC II, the Offered Certificates (or, in the case of the Class BCX Certificates, each component thereof) and the Other Certificates will be "regular interests" of REMIC III and will generally be treated as debt instruments of REMIC III, and the Class R-III Certificates will be the sole class of "residual interests" in REMIC III. The Interest Only Certificates will and the other Offered Certificates may be treated as having been issued with original issue discount for federal income tax purposes. For purposes of computing the accrual of original issue discount, market discount and premium, if any, for federal income tax purposes it will be assumed that there are no prepayments on the Mortgage Loans. However, no representation is made that the Mortgage Loans will not prepay at another rate. For further information regarding the federal income tax consequences of investing in the Offered Certificates, see "Federal Income Tax Consequences" herein and in the Prospectus. ERISA Considerations .......... A fiduciary of any employee benefit plan or other retirement arrangement subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code and any entity whose underlying assets include assets of such a plan by reason of any such plan's investment in the entity should review carefully with its legal advisors whether the purchase or holding of any class of S-9 Offered Certificates could give rise to a transaction that is prohibited or is not otherwise permitted either under ERISA or Section 4975 of the Code or whether there exists any statutory or administrative exemption applicable to an investment therein. The U.S. Department of Labor has issued an individual exemption to the underwriter that generally exempts from the application of certain of the prohibited transaction provisions of Section 406 of ERISA, and the excise taxes imposed on certain prohibited transactions by Sections 4975(a) and (b) of the Code and Section 502(i) of ERISA, transactions relating to the purchase, sale and holding of pass-through certificates underwritten by the underwriter, such as the Class A1, Class A1X, Class A2 and Class A2X Certificates and the servicing and operation of asset pools, provided that certain conditions are satisfied. Purchasers using insurance company general account funds to effect such purchase should consider the availability of Prohibited Transaction Class Exemption 95-60 (60 Fed. Reg. 35925, July 12, 1995) issued by the U.S. Department of Labor. See "ERISA Considerations" herein and in the Prospectus. Rating ........................ It is a condition to the issuance of the Class A1 and Class A2 Certificates that they be rated "_______" by ________________ ("_____________ ") and __________________ ("________________ "). It is a condition of the issuance of the Class A1X and Class A2X Certificates that they be rated "______" by ________________ and "_______" by ________________ . It is a condition of the issuance of the Class B Certificates that they be rated not lower than "____" by ________________ and ________________. It is a condition of the issuance of the Class C Certificate that they be rated not lower than "___" by ________________ and "____" by ________________. It is a condition of the issuance of the Class BCX Certificates that they be rated not lower than "____" by ________________. It is a condition of the issuance of the Class D Certificates that they be rated not lower than "_____" by ________________ and ________________. It is a condition of the issuance of the Class E Certificates that they be rated not lower than "________" by ________________ and ________________. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. A security rating does not address the frequency or likelihood of prepayments (whether voluntary or involuntary) of Mortgage Loans, or the degree to which such prepayments might differ from those originally anticipated, or the likelihood of collection of Prepayment Premiums, or the corresponding effect on yield to investors. A rating of any of the Interest Only Certificates does not address the possibility that the holders of such Certificates may fail to fully recover their initial investments due to a rapid rate of prepayments, defaults or liquidations. See "Certain Prepayment, Maturity and Yield Considerations" herein, "Risk Factors," and "Rating" herein and in the Prospectus and "Yield Considerations" in the Prospectus. Legal Investment .............. The Class ___, Class ___, Class ___, Class ___ and Class ___ Certificates will be "mortgage related securities" within the meaning of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA") so long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization. The Class ___, Class ___ and Class ___ Certificates will not be "mortgage related securities" within the meaning of SMMEA. The appropriate characterization of the Offered Certificates under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase any Class of Offered Certificates, may be subject to significant interpretative uncertainties. In addition, institutions whose investment activities are subject to review by certain regulatory authorities may be or may become subject to restrictions, which may be S-10 retroactively imposed by such regulatory authorities, on the investment by such institutions in certain forms of mortgage-backed securities. Furthermore, certain states have enacted legislation overriding the legal investment provisions of SMMEA. Accordingly, investors should consult their own legal advisors to determine whether and to what extent the Offered Certificates constitute legal investments for them. See "Legal Investment" herein and in the Prospectus. S-11 RISK FACTORS [Description will depend on the particulars of the Mortgage Assets] PROSPECTIVE PURCHASERS OF THE OFFERED CERTIFICATES SHOULD CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK FACTORS (AS WELL AS THE RISK FACTORS SET FORTH UNDER "RISK FACTORS" IN THE PROSPECTUS) IN CONNECTION WITH AN INVESTMENT IN THE OFFERED CERTIFICATES. SPECIAL PREPAYMENT CONSIDERATIONS. The rate and timing of principal payments on the Offered Certificates will depend, among other things, on the rate and timing of principal payments (including prepayments, defaults, liquidations and purchases of Mortgage Loans due to a breach of representation and warranty) on the Mortgage Loans. The rate at which principal payments occur on the Mortgage Pool will be affected by a variety of factors, including, without limitation, the terms of the Mortgage Loans, the level of prevailing interest rates, the availability of mortgage credit and economic, demographic, geographic, tax, legal and other factors. In general, however, if prevailing interest rates fall significantly below the Mortgage Interest Rates on the Mortgage Loans, such Mortgage Loans are likely to be the subject of higher principal prepayments than if prevailing rates remain at or above the rates borne by such Mortgage Loans. The rate of principal payments on the Offered Certificates will correspond to the rate of principal payments on the Mortgage Loans and is likely to be affected by the Lock-out Periods (as defined herein) and Prepayment Premium provisions applicable to the Mortgage Loans and by the extent to which a Servicer is able to enforce such provisions. Mortgage Loans with a Lock-out Period or a Prepayment Premium provision, to the extent enforceable, generally would be expected to experience a lower rate of principal prepayments than otherwise identical mortgage loans without such provisions with shorter Lock-out Periods or with lower Prepayment Premiums. See "Description of the Mortgage Pool," "Description of the Certificates -- Distributions -- Priority of Distributions" and "Certain Prepayment, Maturity and Yield Considerations" herein and "Yield Considerations" in the Prospectus. SPECIAL YIELD CONSIDERATIONS. The yield to maturity on each class of the Offered Certificates will depend, among other things, on the rate and timing of principal payments (including prepayments, defaults, liquidations and purchases of Mortgage Loans due to a breach of representation and warranty) on the Mortgage Pool and the allocation thereof to reduce the Class Balance of such class. Mortgage Loans with higher Mortgage Interest Rates will have higher Remittance Rates, and therefore, the yield on the Class A1X, Class A2X, Class B, Class C, Class D and Class E Certificates could be adversely affected if Mortgage Loans with higher Mortgage Interest Rates pay faster than the Mortgage Loans with lower Mortgage Interest Rates. The yield to investors on the Offered Certificates will be adversely affected by any allocation thereto of interest shortfalls on the Mortgage Loans, such as Prepayment Interest Shortfalls. Neither the Certificates nor the Mortgage Loans are guaranteed by any governmental entity or instrumentality or any other entity. In general, if a Certificate is purchased at a premium and principal distributions thereon occur at a rate faster than anticipated at the time of purchase, the investor's actual yield to maturity will be lower than that assumed at the time of purchase. Conversely, if a Certificate is purchased at a discount and principal distributions thereon occur at a rate slower than that assumed at the time of purchase, the investor's actual yield to maturity will be lower than assumed at the time of purchase. See "Prepayment, Maturity and Yield Considerations" herein and "Yield Considerations" in the Prospectus. RISKS ASSOCIATED WITH CERTAIN OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES. The Mortgage Loans are secured by a fee simple or leasehold interest in multifamily, retail, hotel, health care-related, office, industrial and other commercial properties. Commercial and multifamily lending is generally viewed as exposing the lender to a greater risk of loss than one- to four-family residential lending. Commercial and multifamily lending typically involves larger loans to single borrowers or groups of related borrowers than residential one-to four-family mortgage loans. Further, the repayment of loans secured by income producing properties is typically dependent upon the successful operation of the related property. If the cash flow from the property is reduced (for example, if leases are not obtained or renewed), the borrower's ability to repay the loan may be impaired. Commercial and multifamily real estate can be affected significantly by the supply and demand in the market for the type of property securing the loan and, therefore, may be subject to adverse economic conditions. Market values may vary as a result of economic events or governmental regulations outside the control of the borrower or lender, such as rent control laws in the case of multifamily mortgage loans, which impact the future cash flow of the property. See "Nonrecourse Mortgage Loans" below. S-12 The successful operation of a real estate project is also dependent on the performance and viability of the property manager of such project. The property manager is responsible for responding to changes in the local market, planning and implementing the rental structure, including establishing appropriate rental rates, and advising the borrowers so that maintenance and capital improvements can be carried out in a timely fashion. There is no assurance regarding the performance of any operators and/or managers or persons who may become operators and/or managers upon the expiration or termination of leases or management agreements or following any default or foreclosure under a Mortgage Loan. An appraisal of each of the Mortgaged Properties was made between ___________ 199__ and ___________ 199_. It is possible that the market value of a Mortgaged Property securing a Mortgage Loan has declined since the most recent appraisal for such Mortgaged Property. Commercial and multifamily property values and net operating income are subject to volatility. The net operating income and value of the Mortgaged Properties may be adversely affected by a number of factors, including but not limited to the national, regional and local economic conditions (which may be adversely impacted by plant closings, industry slowdowns and other factors); local real estate conditions (such as an oversupply of housing, retail, office or self-storage space, hotel rooms or nursing homes); changes or continued weakness in specific industry segments; perceptions by prospective tenants and, in the case of retail properties, retailers and shoppers, of the safety, convenience, services and attractiveness of the property; the willingness and ability of the property's owner to provide capable management and adequate maintenance; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; and increases in operating expenses (such as energy costs). Historical operating results of the Mortgaged Properties may not be comparable to future operating results. In addition, other factors may adversely affect the Mortgaged Properties' value without affecting their current net operating income, including changes in governmental regulations, zoning or tax laws; potential environmental or other legal liabilities; the availability of refinancing; and changes in interest rate levels. Mortgage Loans secured by liens on residential health care facilities pose risks not associated with loans secured by liens on other types of income-producing real estate. Providers of long-term nursing care, assisted living and other medical services are subject to federal and state laws that relate to the adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies and additions to facilities and services and to the reimbursement policies of government programs and private insurers. The failure of any of such borrower to maintain or renew any required license or regulatory approval could prevent it from continuing operations (in which case no revenues would be received from the related Mortgaged Property or the portion thereof requiring licensing) or, if applicable, bar it from participation in certain reimbursement programs. Furthermore, in the event of foreclosure, there can be no assurance that the Trustee or any other purchaser at a foreclosure sale would be entitled to the rights under such licenses and such party may have to apply in its own right for such a license. There can be no assurance that a new license could be obtained. In addition, to the extent any nursing home receives a significant portion of its revenues from government reimbursement programs, primarily Medicaid and Medicare, such revenue may be subject to statutory and regulatory changes, retroactive rate adjustments, administrative rulings, policy interpretations, delays by fiscal intermediaries and government funding restrictions. Moreover, governmental payors have employed cost-containment measures that limit payments to health care providers, and there are currently under consideration various proposals in the United States Congress that could materially change or curtail those payments. Accordingly, there can be no assurances that payments under government programs will, in the future, be sufficient to fully reimburse the cost of caring for program beneficiaries. If not, net operating income of the Mortgaged Properties that receive substantial revenues from those sources, and consequently the ability of the related borrowers to meet their Mortgage Loan obligations, could be adversely affected. Under applicable federal and state laws and regulations, including those that govern Medicare and Medicaid programs, only the provider who actually furnished the related medical goods and services may sue for or enforce its rights to reimbursement. Accordingly, in the event of foreclosure, none of the Trustee, the Master Servicer, the Special Servicer or a subsequent lessee or operator of the property would generally be entitled to obtain from federal or state governments any outstanding reimbursement payments relating to services furnished at the respective properties prior to such foreclosure. The aggregate principal balance as of the Cut-off Date related to Mortgage Loans secured by multifamily, retail, hotel, health care-related, office, industrial and other properties represent approximately ____%, ____%, - ----%,----%, ____%, ____% and ____% of the Cut-off Date aggregate principal balance of the Mortgage Pool, respectively. RISKS PARTICULAR TO HOTEL PROPERTIES. _______ of the Mortgage Loans representing____% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date are secured by hotel properties. Like any income S-13 producing property, the income generated by a hotel property is subject to several factors such as local, regional and national economic conditions and competition. However, because such income is primarily generated by room occupancy and such occupancy is usually for short periods of time, the level of such income may respond more quickly to conditions such as those described above. This daily mark-to-market also accentuates the highs and lows of economic cycles. Moreover, as a result of relatively high operating costs, relatively small decreases in revenue can cause significant stress on a property's cash flow. Also, sensitivity to competition may require more frequent improvements and renovations than other properties. To the extent a hotel is affiliated to, or associated with, a regional, national or international chain, changes in the public perception of such chain may have an impact on the income generated by the related property. Finally, the hotel industry is generally seasonal. This will result in fluctuation in the income generated by hotel properties. RISKS PARTICULAR TO RETAIL PROPERTIES. _______ Mortgage Loans, representing ______% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are secured by retail properties. In addition to risks generally associated with real estate, such Mortgage Loans are also affected significantly by adverse changes in consumer spending patterns, local competitive conditions (such as the supply of retail space or the existence or construction of new competitive shopping centers or shopping malls), alternative forms of retailing (such as direct mail, video shopping networks and selling through the Internet which reduce the need for retail space by retail companies), the quality and management philosophy of management, the attractiveness of the properties and the surrounding neighborhood to tenants and their customers, the public perception of the safety of customers at shopping malls and shopping centers, and the need to make major repairs or improvements to satisfy the needs of major tenants. Retail properties may be adversely affected if a significant tenant ceases operations at such locations (which may occur on account of a voluntary decision not to renew a lease, bankruptcy or insolvency of such tenant, such tenant's general cessation of business activities or for other reasons). Significant tenants at a retail property play an important part in generating customer traffic and making a retail property a desirable location for other tenants at such property. In addition, certain tenants at retail properties may be entitled to terminate their leases if an anchor tenant ceases operations at such property. In such cases, there can be no assurance that any such anchor tenants will continue to occupy space in the related shopping centers. RISKS PARTICULAR TO OFFICE PROPERTIES. _____________ Mortgage Loans, representing ______% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are secured by office properties. In addition to risks generally associated with real estate, Mortgage Loans secured by office properties are also affected significantly by adverse changes in population and employment growth (which creates demand for office space), local competitive conditions (such as the supply of office space or the existence or construction of new competitive office buildings), the quality and management philosophy of management, the attractiveness of the properties to tenants and their customers or clients, the attractiveness of the surrounding neighborhood and the need to make major repairs or improvements to satisfy the needs of major tenants. In addition, office properties may be adversely affected by an economic decline in the business operated by their tenants. Such decline may result in one or more significant tenants ceasing operations at such locations (which may occur on account of a voluntary decision not to renew a lease, bankruptcy or insolvency of such tenants, such tenants' general cessation of business activities or for other reasons). If office properties have a single tenant or if there is a significant concentration of tenants in a particular business or industry, the risk of such an economic decline increases. RISKS PARTICULAR TO MULTIFAMILY RENTAL PROPERTIES. _________ Mortgage Loans, representing ______% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are secured by multifamily rental properties. Adverse economic conditions, either local or national, may limit the amount of rent that can be charged for rental units, and may result in a reduction in timely rent payments or a reduction in occupancy levels without a corresponding decrease in expenses. Occupancy and rent levels may also be affected by construction of additional housing units, local military base closings and national and local politics, including, in the case of multifamily rental properties, current or future rent stabilization and rent control laws and agreements. In addition, the level of mortgage interest rates may encourage tenants in multifamily rental properties to purchase single-family housing. Further, the cost of operating a multifamily property may increase, including the cost of utilities and the costs of required capital expenditures. Furthermore, the rent limitations imposed on Mortgaged Properties eligible to receive low-income housing tax credits pursuant to Section 42 of the Code ("Section 42 Properties") may adversely affect the ability of the applicable borrowers to increase rents to maintain such Mortgaged Properties in proper condition during periods of rapid inflation or declining market value of such Mortgaged Properties. In addition, the income restrictions on tenants imposed by Section 42 of S-14 the Code may reduce the number of eligible tenants in such Mortgaged Properties and result in a reduction in occupancy rates applicable thereto. Furthermore, some eligible tenants may not find any differences in rents between the Section 42 Properties and other multifamily rental properties in the same area to be a sufficient economic incentive to reside at a Section 42 Property, which may have fewer amenities or otherwise be less attractive as a residence. Additionally, the characteristics of a neighborhood may change over time or in relation to newer developments. All of these conditions and events may increase the possibility that a borrower may be unable to meet its obligations under its Mortgage Loan. RISKS PARTICULAR TO SELF-STORAGE FACILITIES. ____________ Mortgage Loans, representing ______% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are secured by self-storage properties. Self- storage properties are considered vulnerable to competition because both acquisition costs and break-even occupancy are relatively low. The conversion of self-storage facilities to alternative uses would generally require substantial capital expenditures. Thus, if the operation of any of the self-storage Mortgaged Properties becomes unprofitable due to decreased demand, competition, age of improvements or other factors such that the borrower becomes unable to meet its obligation on the related Mortgage Loan, the liquidation value of that self-storage Mortgaged Property may be substantially less, relative to the amount owing on the Mortgage Loan, than would be the case if the self-storage Mortgaged Property were readily adaptable to other uses. Tenant privacy, anonymity and efficient access may heighten environmental risks. The environmental assessments discussed herein did not include an inspection of the contents of the self-storage units included in the self-storage Mortgaged Properties and there is no assurance that all of the units included in the self-storage Mortgaged Properties are free from hazardous substances or other pollutants or contaminants or will remain so in the future; however, substantially all of the lease agreements used in connection with such Mortgaged Properties prohibit the storage of hazardous substances, pollutants or contaminants. RISKS PARTICULAR TO MOBILE HOME PARKS. _______ Mortgage Loans, representing ______% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, secured by mobile home parks. Loans secured by mobile home parks pose risks not associated with loans secured by liens on other types of income-producing real estate. The successful operation of a Mortgaged Property operated as a mobile home park will generally depend upon the number of competing mobile home parks and other residential developments in the local market, as well as upon other factors such as its age, appearance, reputation, management and the types of services it provides. Mobile home parks are "special purpose" properties that could not be readily converted to general residential, retail or office use. Thus, if the operation of any of the Mortgaged Properties constituting mobile home parks becomes unprofitable due to competition, age of the improvements or other factors such that the borrower becomes unable to meet its obligations on the related Mortgage Loan, the liquidation value of that Mortgaged Property may be substantially less, relative to the amount owing on the Mortgage Loan, than would be the case if the Mortgaged Property were readily adaptable to other uses. RISKS PARTICULAR TO HEALTH CARE-RELATED PROPERTIES. ____________ Mortgage Loans, representing ------% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are secured by health care-related facilities. Health care-related facilities (including nursing homes) typically receive a substantial portion of their revenues from government reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare are subject to statutory and regulatory changes, retroactive rate adjustments, administrative rulings, policy interpretations, delays by fiscal intermediaries and government funding restrictions, all of which can adversely affect revenues from operation. Moreover, governmental payors have employed cost-containment measures that limit payments to health care providers and there are currently under consideration various proposals for national health care relief that could further limit these payments. In addition, providers of long-term nursing care and other medical services are highly regulated by federal, state and local law and are subject to, among other things, federal and state licensing requirements, facility inspections, rate setting, reimbursement policies, and laws relating to the adequacy of medical care, distribution of pharmaceuticals, equipment, personnel operating policies and maintenance of and additions to facilities and services, any or all of which factors can increase the cost of operation, limit growth and in extreme cases, require or result in suspension or cessation of operations. Under applicable federal and state laws and regulations, Medicare and Medicaid reimbursements are generally not permitted to be made to any person other than the provider who actually furnished the related medical goods and services. Accordingly, in the event of foreclosure on a Mortgaged Property that is operated as a health care-related facility, none of the Trustee, the Special Servicer or a subsequent lessee or operator of the Mortgaged Property would generally be entitled to obtain from federal or state governments any outstanding reimbursement payments relating to S-15 services furnished at the respective Mortgaged Properties prior to such foreclosure. Furthermore, in the event of foreclosure, there can be no assurance that the Trustee (or Special Servicer) or purchaser in a foreclosure sale would be entitled to the rights under any required licenses and regulatory approvals and such party may have to apply in its own right for such licenses and approvals. There can be no assurance that a new license could be obtained or that a new approval would be granted. In addition, health care-related facilities are generally "special purpose" properties that could not be readily converted to general residential, retail or office use, and transfers of health care-related facilities are subject to regulatory approvals under state, and in some cases federal, law not required for transfers of other types of commercial operations and other types of real estate, all of which may adversely affect the liquidation value. RISKS PARTICULAR TO INDUSTRIAL PROPERTIES. ____________ Mortgage Loans, representing ______% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are secured by industrial properties. Industrial properties may be adversely affected by reduced demand for industrial space occasioned by a decline in a particular industry segment, and an industrial property that suited the particular needs of its original tenant may be difficult to relet to another tenant or may become functionally obsolete relative to newer properties. Furthermore, industrial properties may be adversely affected by the availability of labor sources or a change in the proximity of supply sources. RISKS PARTICULAR TO CONDOMINIUM PROPERTIES. ____________ Mortgage Loans, representing ______% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are secured by condominium properties. With respect to Mortgage Loans secured by units in a condominium project, the related Mortgagor initially controls the owner's association related to the condominium project securing such loans, either by voting preference or numerical majority. However, with the sale of the individual condominium units, the Mortgagor will eventually relinquish voting control over the condominium association. Without voting control of the owner's association, the Mortgagor may be limited in its ability to direct the operation of the Mortgaged Property and to make improvements to common areas that may be necessary or desirable to enhance the marketability of the remaining units or otherwise preserve the Mortgaged Property. The value of the condominium units securing the Mortgage Loans could be adversely affected if and when the Mortgagor no longer possesses such control rights, and the value of the Mortgagor's security would be likewise affected. Additionally, all Mortgage Loans related to a single condominium project are generally cross-collateralized and cross-defaulted. Thus, if the Mortgagor is unable to make timely payments, all related Mortgage Loans will become defaulted Mortgage Loans at the same time. NONRECOURSE MORTGAGE LOANS. Each Mortgage Loan is a nonrecourse loan as to which, in the event of a default under such Mortgage Loan, recourse generally may be had only against the related Mortgaged Property. Consequently, payment of each such Mortgage Loan prior to maturity is dependent primarily on the sufficiency of the net operating income of the related Mortgaged Property, and at maturity (whether at scheduled maturity or in the event of a default upon the acceleration of such maturity after default), upon the then market value of the related Mortgaged Property, or the ability to refinance such Mortgage Loan. CONCENTRATION OF MORTGAGE LOANS. The average principal balance of the Mortgage Loans as of the Cut-off Date is approximately $____________, which is equal to ____% of the aggregate principal balance as of the Cut-off Date of the Mortgage Loans. A mortgage pool consisting of fewer loans each having a relatively higher outstanding principal balance may result in losses that are more severe, relative to the size of the pool, than would be the case if the pool consisted of a greater number of mortgage loans each having a relatively smaller outstanding principal balance. In addition, the concentration of any mortgage pool in one or more loans that have outstanding principal balances that are substantially larger than the other mortgage loans in such pool can result in losses that are substantially more severe, relative to the size of the pool, than would be the case if the aggregate balance of the pool were more evenly distributed among the loans in such pool. The Mortgage Loan secured by the __________________________ represents______% of the aggregate principal balance of the Mortgage Loans. No other Mortgage Loan represents more than ____% of the aggregate principal balance as of the Cut-off Date of the Mortgage Loans. Mortgage Loans with related Mortgagors represent in the aggregate _____% of the aggregate principal balance as of the Cut-off Date of the Mortgage Loans but no single group of related Mortgagors represents in excess of __% of the aggregate principal balance of the Mortgage Loans. See "Description of the Mortgage Pool - -- Certain Characteristics of the Mortgage Loans -- Related Borrowers and Other Issues" herein. S-16 RISKS OF DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION. If and as principal payments, property releases, or prepayments are made on a Mortgage Loan, the remaining Mortgage Pool may be subject to more concentrated risk with respect to the diversity of properties, types of properties and property characteristics and with respect to the number of borrowers. See the table entitled "Year of Scheduled Maturity" under "Description of the Mortgage Pool -- Certain Characteristics of the Mortgage Loans" for a description of the respective maturity dates of the Mortgage Loans. Because principal on the Offered Certificates is payable in sequential order, and no class receives principal until the Class Balance of the preceding class or classes has been reduced to zero, classes that have a lower sequential priority are more likely to be exposed to the risk of concentration discussed under "--Concentration of Mortgage Loans" above than classes with a higher sequential priority. GEOGRAPHIC CONCENTRATION. __, __, __, __ and __ of the Mortgaged Properties, representing approximately ____%, ____%, ____%, ____% and ____%, respectively, of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are located in ______________, _________, __________, _________ and _________, respectively. Except as indicated in the immediately preceding sentence, no more than ___% of the Mortgage Loans, by aggregate principal balance of the Mortgage Loans as of the Cut-off Date are secured by Mortgaged Properties in any one state. Repayments by borrowers and the market value of the Mortgaged Properties could be affected by economic conditions generally or in regions where the borrowers and the Mortgaged Properties are located, conditions in the real estate market where the Mortgaged Properties are located, changes in governmental rules and fiscal policies, acts of nature, including earthquakes (which may result in uninsured losses), and other factors which are beyond the control of the borrowers. ENVIRONMENTAL RISKS. Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal and remediation of hazardous or toxic substances on, under, adjacent to or in such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The cost of any required remediation and the owner's liability therefor as to any property is generally not limited under such enactments and could exceed the value of the property and/ or the aggregate assets of the owner. In addition, the presence of hazardous or toxic substances, or the failure to properly remediate such property, may adversely affect the owner's or operator's ability to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility. Certain laws impose liability for release of asbestos into the air and third parties may seek recovery from owners or operators of real properties for personal injury associated with exposure to asbestos. Under some environmental laws, such as the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended ("CERCLA"), as well as certain state laws, a secured lender (such as the Trust Fund) may be liable as an "owner" or "operator", for the costs of responding to a release or threat of a release of hazardous substances on or from a borrower's property, if agents or employees of a lender are deemed to have participated in the management of the borrower's property, regardless of whether a previous owner caused the environmental damage. The Trust Fund's potential exposure to liability for cleanup costs pursuant to CERCLA may increase if the Trust Fund actually takes possession of a borrower's property, or control of its day-to-day operations, as for example through the appointment of a receiver. An environmental site assessment ("ESA") of each of the Mortgaged Properties was performed (or prior assessments were updated) in connection with the initial underwriting and origination of the Mortgage Loans. In certain cases, environmental testing in addition to the ESA was performed. The following information is based on the ESAs and has not been independently verified by the Depositor, the Servicers, the Trustee, the Underwriter, or by any of their respective affiliates. With respect to a number of the Mortgaged Properties, the ESAs revealed the existence of asbestos-containing materials, possible radon gas and other environmental matters at the related Mortgaged Properties, none of which constituted a material violation of any environmental law in the judgment of the assessor. In these cases, the Mortgagors agreed to establish and maintain operations and maintenance programs or had other remediation agreements or escrows in place. With respect to several Mortgaged Properties, the ESAs identified the presence of above-ground or underground storage tanks and the related Mortgagors have agreed to make periodic visual inspections or other testing for any petroleum releases. S-17 It is possible that the ESAs did not reveal all environmental liabilities, that there are material environmental liabilities of which neither ICCC nor the Depositor are aware and that the environmental condition of the Mortgaged Properties in the future could be affected by tenants and occupants or by third parties unrelated to the Mortgagors. Each Mortgagor has represented that, except as described in the environmental reports referred to above, each Mortgaged Property either was, or to the best of its knowledge was, in compliance with applicable environmental laws and regulations on the date of the origination of the related Mortgage Loan; that, except as described in the environmental reports referred to above, no actions, suits or proceedings have been commenced or are pending or, to the best knowledge of the Mortgagor, are threatened with respect to any applicable environmental laws and that such Mortgagor has not received notice of any violation of a legal requirement relating to the use and occupancy of any Mortgaged Property. The principal security for the obligations under each Mortgage Loan consists of the Mortgaged Property and, accordingly, if any such representations are breached, there can be no assurance that any other assets of the Mortgagor would be available in connection with any exercise of remedies in respect of such breach. Moreover, most Mortgagors are structured as single asset entities and therefore have no assets other than the related Mortgaged Property. The Pooling and Servicing Agreement provides that the Special Servicer, acting on behalf of the Trust Fund, may not acquire, through foreclosure or deed in lieu thereof, title to a Mortgaged Property or take over its operation unless the Special Servicer has previously determined, based on a report prepared by a qualified person who regularly conducts environmental audits, that (i) the Mortgaged Property is in compliance with applicable environmental laws or that taking the actions necessary to comply with such laws is reasonably likely to produce a greater recovery on a present value basis than not taking such actions and (ii) there are no circumstances known to the Special Servicer relating to the use of hazardous substances or petroleum-based materials which require investigation or remediation, or that if such circumstances exist, taking such remedial actions is reasonably likely to produce a greater recovery on a present value basis than not taking such actions. LITIGATION. There may be legal proceedings pending and, from time to time, threatened against the Mortgagors and the managers of the Mortgaged Properties and their respective affiliates arising out of the ordinary business of the Mortgagor, the managers and such affiliates. There can be no assurance that such litigation may not have a material adverse effect on distributions to Certificateholders. OTHER FINANCINGS. Each Mortgagor is restricted from incurring any indebtedness secured by the related Mortgaged Property other than the related Mortgage Loan without the consent of the lender. With respect to ___ Mortgage Loans representing ______% of the Mortgage Pool and which were made to single purpose entities, the Mortgagor is restricted from incurring any indebtedness other than the Mortgage Loan, normal trade accounts payable and certain purchase financing debt, except that _____ of these Mortgagors representing ____% of the Mortgage Pool have unsecured subordinate debt that is subject to a subordination and standstill agreement limiting the rights of the holder of such additional indebtedness including limitations on its right to commence any enforcement or foreclosure proceeding. In cases where one or more junior liens are imposed on a Mortgaged Property or the Mortgagor incurs other indebtedness, the Trust Fund is subjected to additional risks, including, without limitation, the risks that the Mortgagor may have greater incentives to repay the junior or unsecured indebtedness first and that it may be more difficult for the Mortgagor to refinance the Mortgage Loan or to sell the Mortgaged Property for purposes of making the Balloon Payment upon the maturity of the Mortgage Loan. EFFECT OF MORTGAGOR DELINQUENCIES AND DEFAULTS. The aggregate amount of distributions on the Offered Certificates, the yield to maturity of the Offered Certificates, the rate of principal payments on the Offered Certificates and the weighted average lives of the Offered Certificates will be affected by the rate and the timing of delinquencies and defaults on the Mortgage Loans. If a purchaser of a class of Offered Certificates calculates its anticipated yield based on an assumed rate of default and amount of losses on the Mortgage Loans that is lower than the default rate and amount of losses actually experienced and such additional losses are allocable to such class of Certificates, such purchaser's actual yield to maturity will be lower than that so calculated and could, under certain extreme scenarios, be negative. The timing of any loss on a liquidated Mortgage Loan will also affect the actual yield to maturity of the class of Offered Certificates to which a portion of such loss is allocable, even if the rate of defaults and severity of losses are consistent with an investor's expectations. In general, the earlier a loss borne by an investor occurs, the greater is the effect on such investor's yield to maturity. S-18 As and to the extent described herein, each Servicer will be entitled to receive interest on unreimbursed P&I Advances and unreimbursed advances of servicing expenses until such advances (i) are recovered out of amounts received on the Mortgage Loan as to which such advances were made pursuant to the Pooling and Servicing Agreement, which amounts are in the form of late payments, liquidation proceeds, insurance proceeds, condemnation proceeds or amounts paid in connection with the purchase of such Mortgage Loan out of the Trust Fund or (ii) are otherwise recovered following a determination that such advance is a nonrecoverable advance. Each Servicer's right to receive such payments of interest is prior to the rights of Certificateholders to receive distributions on the Certificates and, consequently, is likely to result in losses being allocated to the Offered Certificates that would not otherwise have resulted absent the accrual of such interest. The Special Servicer will be entitled to receive, with respect to each Mortgage Loan which is or was at some time a Specially Serviced Mortgage Loan, compensation in the form of a percentage of collections of any such Specially Serviced Mortgage Loan prior to the right of Certificateholders to receive distributions on the Certificates. Consequently, it is possible that shortfalls will be allocated to the Offered Certificates with respect to any Mortgage Loan which is or was at some time a Specially Serviced Mortgage Loan notwithstanding the fact that such Mortgage Loan is returned to a performing status. See "Servicing -- Servicing and Other Compensation and Payment of Expenses" herein. Regardless of whether losses ultimately result, delinquencies and defaults on the Mortgage Loans may significantly delay the receipt of payments by the holder of a class of Offered Certificates, to the extent that P&I Advances or the subordination of another class of Certificates does not fully offset the effects of any such delinquency or default. The Special Servicer has the ability to extend and modify Mortgage Loans that are in default or as to which a payment default is imminent, including the ability to extend the date on which a Balloon Payment is due, subject to certain conditions described in the Pooling and Servicing Agreement. A Servicer's obligation to make P&I Advances in respect of a Mortgage Loan that is delinquent as to its Balloon Payment is limited, however, to the extent described under "Description of the Certificates - -- Advances." Until such time as any Mortgage Loan delinquent in respect of its Balloon Payment is liquidated, the entitlement of the holders of any class of Offered Certificates on each Distribution Date in respect of principal of such Mortgage Loan will be limited to any payment made by the related Mortgagor and any related P&I Advance made by a Servicer. Consequently, any delay in the receipt of a Balloon Payment that is payable, in whole or in part, to holders of the Offered Certificates will extend the weighted average life of the Offered Certificates. As described under "Description of the Certificates -- Distributions" herein, if the portion of the Adjusted Available Distribution Amount distributable in respect of interest on any class of Offered Certificates on any Distribution Date is not sufficient to distribute the Interest Distribution Amount then payable for such class, the shortfall will be distributable to holders of such class of Certificates on subsequent Distribution Dates, to the extent of available funds. BALLOON PAYMENTS. __________Mortgage Loans, representing_____% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are Balloon Mortgage Loans. Balloon Mortgage Loans involve a greater degree of risk because the ability of a Mortgagor to make a Balloon Payment typically depends on his ability either to refinance the loan or to sell the related Mortgaged Property. See "Risk Factors -- Balloon Payments" in the Prospectus. GROUND LEASES AND OTHER LEASEHOLD INTERESTS. ____ Mortgage Loans, representing ____ of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date, are secured in part by leasehold interests in two Mortgaged Properties. Pursuant to Section 365(h) of the Bankruptcy Code, ground lessees are currently afforded rights not to treat a ground lease as terminated and to remain in possession of their leased premises upon the bankruptcy of their ground lessor and the rejection of the ground lease by the representative of such ground lessor's bankruptcy estate. The leasehold mortgages provide that the Mortgagor may not elect to treat the ground lease as terminated on account of any such bankruptcy of, and rejection by, the ground lessor without the consent of the Servicer. In the event of a bankruptcy of a ground lessee/borrower, the ground lessee/borrower under the protection of the Bankruptcy Code has the right to assume (continue) or reject (terminate) any or all of its ground leases. In the event of concurrent bankruptcy proceedings involving the ground lessor and the ground lessee/Mortgagor, the Trustee may be unable to enforce the bankrupt ground lessee/Mortgagor's obligation to refuse to treat a ground lease rejected by a bankrupt ground lessor as terminated. In such circumstances, a ground lease could be terminated notwithstanding lender protection provisions contained therein or in the mortgage. S-19 ATTORNMENT CONSIDERATIONS. Some of the tenant leases, including the anchor tenant leases, contain certain provisions that require the tenant to attorn to (that is, recognize as landlord under the lease) a successor owner of the property following foreclosure. Some of the leases, including the anchor tenant leases, may be either subordinate to the liens created by 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 (e.g., 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, and if the lease contains provisions inconsistent with the Mortgage (e.g., provisions relating to application of insurance proceeds or condemnation awards), the provisions of the lease will take precedence over the provisions of the Mortgage. LIQUOR LICENSE CONSIDERATIONS. _______ Mortgage Loans, representing _____% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date are secured by hotel properties. The liquor licenses for some of such properties may be held by the property manager rather than by the related Mortgagor. The applicable laws and regulations relating to such licenses generally prohibit the transfer of such licenses to any person. In the event of a foreclosure of a hotel property it is unlikely that the Trustee (or Special Servicer) or purchaser in any such sale would be entitled to the rights under the liquor license for such hotel property and such party would be required to apply in its own right for such license. SPECIAL SERVICER ACTIONS. In connection with the servicing of Specially Serviced Mortgage Loans, the Special Servicer may take actions with respect to such Mortgage Loans that could adversely affect the holders of some or all of the classes of Offered Certificates. As described herein under "Servicing -- Responsibilities of Special Servicer," the actions of the Special Servicer will be subject to review and may be rejected by a representative of the holders of the Monitoring Certificates (as defined herein), who may have interests in conflict with those of the holders of the other classes of Certificates. As a result, it is possible that such representative may cause the Special Servicer to take actions which conflict with the interests of certain classes of Certificates. SERVICER MAY PURCHASE CERTIFICATES. The Special Servicer may purchase, either directly or through an affiliate, a portion of the Class NR Certificates. Such a purchase by the Special Servicer could cause a conflict between the Special Servicer's duties pursuant to the Pooling and Servicing Agreement and the Special Servicer's interest as a holder of a Certificate. The Pooling and Servicing Agreement provides that each Servicer shall administer the Mortgage Loans in accordance with the servicing standard set forth therein without regard to ownership of any Certificate by such Servicer or any affiliate of such Servicer. DESCRIPTION OF THE MORTGAGE POOL GENERAL The Trust Fund will consist primarily of a pool of fixed rate Mortgage Loans with an aggregate principal balance as of the Cut-off Date, after deducting payments of principal due on such date, of approximately $_____________. Each Mortgage Loan is evidenced by a promissory note (a "MORTGAGE NOTE") and secured by a mortgage, deed of trust or other similar security instrument (a "MORTGAGE") creating a first lien on a fee simple or leasehold interest in a multifamily, retail, hotel, office, industrial, or other commercial property (a "MORTGAGED PROPERTY"). All of the Mortgage Loans are nonrecourse loans. Therefore, in the event of a Mortgagor default, recourse may be had only against the specific property and such limited other assets as have been pledged to secure a Mortgage Loan, and not against the Mortgagor's other assets. Except as otherwise indicated all percentages of the Mortgage Loans described herein are approximate percentages by aggregate principal balance as of the Cut-off Date. Of the Mortgage Loans to be included in the Trust Fund ___% were originated by ICCC, ___% by _________________________, a _________________________, __% by ___________________________________, a ______________________________, and ___% by _________________________, a _________________________. S-20 The originators of the Mortgage Loans are referred to herein as the "ORIGINATORS". All the Mortgage Loans were underwritten generally in conformity with certain guidelines provided by ICCC. See "--Underwriting Guidelines" below. ICCC purchased the Mortgage Loans to be included in the Mortgage Pool prior to the Delivery Date from each Originator pursuant to a mortgage loan purchase agreement (the "MORTGAGE LOAN PURCHASE AGREEMENT"). The Depositor will acquire such Mortgage Loans from ICCC on or before the Delivery Date. The Depositor will cause the Mortgage Loans in the Mortgage Pool to be assigned to the Trustee pursuant to the Pooling and Servicing Agreement. _________________________ will be the Master Servicer and Special Servicer with respect to all the Mortgage Loans. The Primary Servicers are _________________________, with respect to each Mortgage Loan originated by _______________________ and _____________________________ with respect to all other Mortgage Loans. Each Servicer will service the Mortgage Loans pursuant to a servicing agreement (each a "SERVICING AGREEMENT"), among the initial purchaser of the Mortgage Loans, the Master Servicer, the Special Servicer and the related Primary Servicer, and the Master Servicer and the Special Servicer will also service the Mortgage Loans pursuant to the Pooling and Servicing Agreement. Upon transfer of the Mortgage Loans to the Trust Fund, all of the rights and obligations of the initial purchaser with respect to such Mortgage Loans under the related Servicing Agreement will be assigned to the Trustee. REPRESENTATIONS AND WARRANTIES Under a loan sale agreement (the "LOAN SALE AGREEMENT"), ICCC will make certain representations and warranties to the Depositor. Pursuant to the terms of the Loan Sale Agreement, ICCC will be obligated to cure any breach of such representations and warranties or to repurchase any Mortgage Loan from the Depositor as to which there exists a breach of any such representation or warranty that materially and adversely affects the interests of the Certificateholders in such Mortgage Loan. ICCC shall covenant with the Depositor to repurchase any Mortgage Loan from the Depositor or cure any such breach within 90 days of receiving notice thereof. Under the Pooling and Servicing Agreement, the Depositor will assign its rights under the Loan Sale Agreement to the Trustee for the benefit of the Certificateholders. The sole remedy available to the Trustee or the Certificateholders is the obligation of ICCC to cure or repurchase any Mortgage Loan in connection with which there has been a breach of any such representation or warranty which materially and adversely affects the interest of the Certificateholders in such Mortgage Loan. ICCC has generally represented and warranted as of the Delivery Date with respect to each Mortgage Loan, among other things, that: (i) ICCC has good and indefeasible title to the related Mortgage Note and Mortgage and is the sole owner and holder of such Mortgage Loan, has full right and authority to sell and assign such Mortgage Loan hereunder, and is transferring such Mortgage Loan to the Depositor free and clear of any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of any nature. (ii) Each of the related Mortgage Note, Mortgage and other agreements executed in connection therewith is genuine and is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms except as such enforcement may be limited by (1) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, redemption or other similar laws affecting the enforcement of creditors' rights generally and (2) general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law); and there is no valid offset, defense or counterclaim or right of rescission to any Mortgage Note or Mortgage, including the obligation of the mortgagor to pay the unpaid principal of and interest on the Mortgage Note. (iii) The terms of the related Mortgage Note and Mortgage have not been impaired, waived, altered or modified in any material respect, except by written instruments which have been recorded, if necessary, to protect the interest of the Depositor and which have been delivered to the Depositor. The substance of any such alteration or modification is reflected on the Mortgage Loan Schedule, if applicable; the related mortgagor or guarantor has not been released, in whole or in part, from its obligations under the related Mortgage Note, Mortgage or any guaranty related to such Mortgage Note, as the case may be, other than pursuant to releases previously approved in writing by ICCC or any affiliate thereof, copies of which have been delivered to the Depositor. S-21 (iv) There is no default, breach, violation or event of acceleration existing under the related Mortgage or Mortgage Note, ICCC has not waived any such default, breach, violation or event of acceleration, and, to the best of ICCC's knowledge, no event has occurred which, with the passing of time or the giving of notice, would constitute such a default, breach, violation or event of acceleration. (v) All federal, state and local laws, rules and regulations applicable to such Mortgage Loan, including without limitation, those relating to usury, equal credit opportunity, real estate settlement procedures or disclosure, have been satisfied or complied with in all material respects as of the origination date. (vi) To the extent required under applicable law, each originator and subsequent mortgagee was authorized to transact and do business in the jurisdiction in which the related Mortgaged Property is located at all times when it held the Mortgage Loan. (vii) To the best of ICCC's knowledge, there is no proceeding pending or threatened for the total or partial condemnation of the related Mortgaged Property as of the applicable closing date. (viii) As of the applicable closing date the Mortgaged Property is in good repair and free and clear of any damage that would affect materially and adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended or escrows have been established for the purpose of effecting necessary repairs and maintenance. (ix) No Mortgage Loan is a participation interest, but instead is a whole loan, all of the interest in which is conveyed hereunder. (x) Neither ICCC nor any of its agents or affiliates has, directly or indirectly, advanced funds, or received any advance of funds by a party other than the related borrower, for the payment of any amount required by the related Mortgage Note or Mortgage, except for interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage Loan proceeds, whichever is later, to the date which preceded by 30 days the first due date under the related Mortgage Note. (xi) No scheduled payment under any Mortgage Loan is more than 30 days past due as of the Date of Conveyance, nor has any Mortgage Loan been delinquent more than 30 days during the 12 months prior to the Date of Conveyance. (xii) Any related Assignment of Leases and Rents creates a valid first priority assignment of or security interest in the right to receive all payments due under the related lease, if any, whether as rental payments or in respect of any purchase option, subject only to a license from the mortgagee to the mortgagor allowing such mortgagor to collect all such payments, which license will be automatically revoked, or at the option of the mortgagee, may be revoked, upon a default by the mortgagor under the terms of the Mortgage; and no Person other than the mortgagor owns any interest in any payments due under such lease that is superior to or of equal priority with the mortgagee's interest therein. (xiii) The Mortgage Note relating to each Mortgage Loan provides for level monthly payments (exclusive of the initial payment and any balloon payment on a balloon Mortgage Loan) and does not provide for any grace period that exceeds 10 days during which remittance by the mortgagor of any monthly payment may be deferred without the payment of any default interest or late charge therefor; there is no difference for any period between the amount of interest accrued on such Mortgage Loan and the amount of interest payable thereon; and no Mortgage Loan provides for contingent interest. (xiv) As of origination of each Mortgage Loan the related borrower was in possession of all material certificates of occupancy or other similar licenses, permits and other authorizations necessary and required by applicable law for the use of the related Mortgaged Property; and all such certificates of occupancy or other similar licenses, permits and authorizations are valid and in full force and effect. (xv) The information set forth on the Mortgage Loan Schedule is complete, true and correct in all material respects as of the date or dates respecting which the information is furnished. S-22 (xvi) To the best of ICCC's knowledge in reliance upon the title policy referred to below and the survey for the Mortgaged Property, the related Mortgage constitutes a valid and enforceable first lien upon the related Mortgaged Property, including all buildings thereon and all fixtures attached thereto, subject only to (A) the lien of current real property taxes and assessments not yet due and payable, (B) covenants, conditions and restrictions, rights of way, easements and other matters of public record, none of which materially interferes with the security intended to be provided by such Mortgage, (C) exceptions and exclusions specifically referred to in the lender's title insurance policy described below, none of which materially interferes with the security intended to be provided by such Mortgage, and (D) other matters to which like properties are commonly subject, none of which materially interferes with the security intended to be provided by such Mortgage ("PERMITTED EXCEPTIONS"). (xvii) The proceeds of each Mortgage Loan have been fully disbursed, or, in cases of partial disbursement there is no requirement for future advances thereunder, and any and all requirements imposed by the mortgagee as to completion of any on-site or off-site improvements and as to disbursements of any escrow funds therefor have been complied with as of the Date of Conveyance. (xviii) On the date of origination of each Mortgage Loan, an ALTA lender's title insurance policy or a comparable form of lender's title insurance policy or a binding commitment therefor was issued in an amount not less than the original principal balance of the Mortgage Loan, or a favorable opinion of counsel was rendered, insuring or confirming that the related Mortgage constitutes a valid first lien on the related Mortgaged Property, subject only to the Permitted Exceptions described above; such title insurance policy is freely assignable to the Depositor; on the date of transfer and assignment of such Mortgage Loan to the Depositor, such title insurance policy is valid and in full force and effect, and, immediately following the transfer and assignment of such Mortgage Loan to the Depositor, such title insurance policy will inure to the benefit of the Depositor, as mortgagee of record; and no claims have been made under any title insurance policy and ICCC has not taken any action that would cause such title insurance policy not to be valid and in full force and effect. (xix) All taxes, governmental assessments, insurance premiums, and water, sewer and municipal charges, and ground rents, if any, which previously became due and owing in respect of the related Mortgaged Property have been paid, or an escrow of funds in an amount sufficient to cover such payments has been established. (xx) Each Mortgage Loan is covered by hazard insurance (and, if applicable, federal flood insurance) in an amount at least equal to the greater of (A) the amount of the Mortgage Loan on the related Mortgaged Property, and (B) an amount sufficient to avoid the application of any coinsurance clause contained in the related insurance policy, together with a replacement cost rider or other provision that does not allow for any reduction due to depreciation; such insurance requires prior notice to ICCC of termination or cancellation, and no such notice has been received; the Mortgage obligates the related mortgagee to maintain such insurance and, upon such mortgagor's failure to do so, authorizes the mortgagee to maintain such insurance at the mortgagor's cost and expense and to seek reimbursement therefor from such mortgagor; all premium payments due and owing have been paid. (xxi) ICCC has received a phase I environmental site assessment (the "ESA") certified as having been prepared in accordance with the Standard Practice for Environmental Site Assessments, Phase I Environmental Site Assessment Process (E1527-94) established by the American Society for Testing and Materials. To the best of ICCC's knowledge, and in reliance on the ESA, there exist no circumstances or conditions respecting the Mortgaged Property that might (1) constitute or result in a material violation of any Environmental Law, (2) require any expenditure material in relation to the principal balance of the Mortgage Loans as of the Date of Conveyance to achieve or maintain compliance therewith, (3) impose any material constraint on operation of the Mortgaged Property or change in the use thereof or (4) require cleanup, remedial action or other response under any Environmental Law by the applicable Borrower or any subsequent owner of the Mortgaged Property, in each case other than those matters disclosed in the ESAs and for which operation and management programs or escrows for anticipated costs have been established, as recommended in the related ESA. Other than as described in the preceding sentence, ICCC has received no notice of (A) any actual or alleged failure of the Mortgaged Property to comply with any applicable Environmental Laws in any S-23 material respect, (B) any known or alleged presence of any material amount of Hazardous Substances on, under or immediately bordering such Mortgaged Property, or (C) any pending or threatened claim with respect to material environmental matters relating to such Mortgaged Property. (xxii) (1) Each Mortgage Loan is directly secured by a mortgage on a commercial or multifamily property, and (2) either (A) substantially all of the proceeds of such Mortgage Loan were used to acquire or improve or protect an interest in real property that, at the origination date, was the only security for the Mortgage Loan or (B) fair market value of such real property was at least equal to 80% of the principal amount of the Mortgage Loan at origination. (xxiii) To the best of ICCC's knowledge in reliance on the related title insurance policy, there are no mechanics' or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under law could give rise to any such lien) affecting the Mortgaged Property which are or may be prior or equal to, or coordinate with, the lien of the Mortgage except those which are insured against by the mortgagee title insurance policy referred to above. (xxiv) The related Assignment of Mortgage constitutes a legal, valid and binding assignment of such Mortgage to the Depositor, and the related Reassignment of Assignment of Leases and Rents, if any, constitutes a legal, valid and binding assignment thereof to the Depositor. (xxv) The mortgage instruments relating to such Mortgage Loan contain provisions protective of the mortgagee's interests customary in ICCC's commercial mortgage loans at the time such Mortgage Loan was originated; and the related Mortgage Note or the related Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security, including realization by judicial or, if applicable, nonjudicial foreclosure, and there is no exemption available to the borrower which would interfere with such right to foreclose, except as may be limited by (A) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, redemption or other similar laws affecting the enforcement of creditors' rights generally and (B) general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law). (xxvi) The related Mortgage Note is not, and has not been since the date of origination of the Mortgage Loan, secured by any collateral except the lien of the related Mortgage, any related Assignment of Leases and Rents and any related security agreement and escrow agreement; the security for the Mortgage Loan consists only of the related Mortgaged Property, any leases (including without limitation any credit leases) thereof any appurtenances, fixtures and other property located thereon; and such Mortgaged Property does not secure any mortgage loan other than the Mortgage Loan being transferred and assigned to the Depositor hereunder except for Mortgage Loans which are cross-collateralized with other Mortgage Loans being conveyed to the Depositor or subsequent transferee hereunder and identified on the Mortgage Loan Schedule. (xxvii) If the related Mortgage is a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the deed of trust or has been substituted in accordance with applicable law, and no fees or expenses are or will become payable to the trustee under the deed of trust, except in connection with a trustee's sale after default by the mortgagor or in connection with the release of the Mortgaged Property or related security for the Mortgage Loan following the payment of the Mortgage Loan in full. (xxviii) All escrow deposits and payments relating to such Mortgage Loan are in the possession, or under the control, of ICCC, and all amounts required to be deposited by the related borrower have been deposited and there are no deficiencies with regard thereto. (xxix) To the best of ICCC's knowledge in reliance upon a review of the title policy and survey for the Mortgaged Properties, none of the improvements which were included for the purpose of determining the appraised value of the related Mortgaged Property at the time of the origination of such Mortgage Loan lies outside of the boundaries and building restriction lines of such property in effect at the time such improvements S-24 were constructed, and no improvements on adjoining properties materially encroach upon such Mortgaged Property. (xxx) With respect to any Mortgage which is secured in whole or in part by the interest of a borrower as a lessee under a ground lease and based upon the terms of the ground lease or an estoppel letter from the ground lessor, either (1) the ground lessor's fee interest is subordinated to the lien of the mortgage or (2) the following apply to such ground lease: (A) The ground lease or a memorandum thereof has been duly recorded, the ground lease permits the interest of the lessee thereunder to be encumbered by the related mortgage, does not restrict the use of the mortgaged property, lessee, its successors and assigns in a manner that would adversely affect the security provided by the related mortgage, and there has not been a material change in the terms of the ground lease since its recordation, with the exception of written instruments which are part of the related Mortgage File. (B) The ground lease is not subject to any liens or encumbrances superior to, or of equal priority with, the related Mortgage, other than the related ground lessor's related fee interest. (C) The borrower's interest in the ground lease is assignable to the holder of the Mortgage upon notice to, but without the consent of, the lessor thereunder and, in the event that it is so assigned, it is further assignable by the trustee and its successors and assigns upon notice to, but without a need to obtain the consent of, such lessor. (D) As of the Date of Conveyance, the ground lease is in full force and effect and no default has occurred under the ground lease and there is no existing condition which, but for the passage of time or the giving of notice, would result in a default under the terms of the ground lease. (E) The ground lease requires the lessor thereunder to give notice of any default by the lessee to the mortgagee; and the ground lease, or an estoppel letter received by the mortgagee from the lessor, further provides that notice of termination given under the ground lease is not effective against the mortgagee unless a copy of the notice has been delivered to the mortgagee in the manner described in such ground lease or estoppel letter. (F) The mortgagee is permitted a reasonable opportunity (including, where necessary, sufficient time to gain possession of the interest of the lessee under the ground lease) to cure any default under the ground lease, which is curable after the receipt of notice of any default before the lessor thereunder may terminate the ground lease. (G) The ground lease has a term which extends not less than 10 years beyond the maturity date of the related Mortgage Loan. (H) The ground lease requires the lessor to enter into a new lease upon termination of the ground lease for any reason, including rejection of the ground lease in a bankruptcy proceeding. (I) Under the terms of the ground lease and the related Mortgage, taken together, any related insurance proceeds will be applied either to the repair or restoration of all or part of the related Mortgaged Property, with the mortgagee or a trustee appointed by it having the right to hold and disburse the proceeds as the repair or restoration progresses, or to the payment of the outstanding principal balance of the Mortgage Loan together with any accrued interest thereon. (J) Such ground lease does not impose restrictions on subletting. (K) Either the ground lease or the related Mortgage contains the borrower's covenant that such ground lease shall not be amended, canceled or terminated without the prior written consent of the mortgagee. S-25 (L) In the case of any default under the ground lease which is not curable by the mortgagee, or in the event of the bankruptcy or insolvency of the ground lessee, the mortgagee has the right, following termination of the existing ground lease or rejection thereof by a bankruptcy trustee or similar party, to enter into a new ground lease with the lessor on substantially the same terms as the existing ground lease. (M) The ground lease or an estoppel letter contains a covenant that the lessor thereunder is not permitted, in the absence of an uncured default, to disturb the possession, interest or quiet enjoyment of any lessee in the relevant portion of the Mortgaged Property subject to such ground lease for any reason, or in any manner, which would materially adversely affect the security provided by the related Mortgage. (xxxi) To the extent ICCC originated the Mortgage Loan, such Mortgage Loan has been originated in compliance in all material respects with its underwriting guidelines. (xxxii) All items required to be included in the Mortgage File for each Mortgage Loan are so included and each Mortgage File has been delivered to the Custodian, (xxxiii) With respect to any Mortgage which is secured by a senior housing or nursing home facility ("FACILITY"): (A) Based upon representations by the borrower and each facility operator or manager (each an "OPERATOR"), each borrower and each Facility complies with all federal, state and local laws, regulations, quality and safety standards, accreditation standards and requirements of the applicable state Department of Health (each a "DOH") and all other federal, state or local governmental authorities including, without limitation, those relating to the quality and adequacy of medical care, distribution of pharmaceuticals, rate setting, equipment, personnel, operating policies, additions to facilities and services and fee splitting. (B) All governmental licenses, permits, regulatory agreements or other approvals or agreements necessary or desirable for the use and operation of each Facility as intended are held by the applicable borrower or Operator and are in full force and effect, including, without limitation, a valid certificate of need ("CON") or similar certificate, license, or approval issued by the DOH for the requisite number of beds, and approved provider status in any approved provider payment program (collectively, the "LICENSES"). (C) Based upon representations and covenants in the Mortgage and, where applicable, certificates of government officials, the Licenses, including, without limitation, the CON: (1) May not be, and have not been, transferred to any location other than the Facility; (2) Have not been pledged as collateral security for any other loan or indebtedness; and (3) Are held free from restrictions or known conflicts which would materially impair the use or operation of the Facility as intended, and are not provisional, probationary or restricted in any way. (D) So long as the Mortgage remains outstanding, no borrower or Operator is permitted pursuant to the terms of the Mortgage without the consent of the holder of the Mortgage to: (1) rescind, withdraw, revoke, amend, modify, supplement, or otherwise alter the nature, tenor or scope of the Licenses for any Facility (other than the addition of services or other matters expanding or improving the scope of such license); S-26 (2) amend or otherwise change any Facility's authorized bed capacity and/or the number of beds approved by the DOH; or (3) replace or transfer all or any part of any Facility's beds to another site or location. (E) Based upon representations and covenants in the Mortgage, each Facility is in compliance with all requirements for participation in Medicare and Medicaid, including, without limitation, the Medicare and Medicaid Patient Protection Act of 1987; each Facility is in conformance in all material respects with all insurance, reimbursement and cost reporting requirements, and has a current provider agreement which is in full force and effect under Medicare and Medicaid. (F) To the best of ICCC's knowledge, there is no threatened or pending revocation, suspension, termination, probation, restriction, limitation, or nonrenewal affecting any borrower, Operator, or Facility or any participation or provider agreement with any third-party payor, including Medicare, Medicaid, Blue Cross and/or Blue Shield, and any other private commercial insurance managed care and employee assistance program (such programs, the "THIRD-PARTY PAYORS' PROGRAMS") to which any borrower or Operator presently is subject. The Mortgage contains representations and covenants by the borrower that all Medicaid, Medicare, and private insurance cost reports and financial reports submitted by the borrower or Operator are and will be materially accurate and complete and have not been and will not be misleading in any material respects, and except as otherwise disclosed, no cost reports for any Facility remain "open" or unsettled. (G) To the best of ICCC's knowledge and based on representations by each borrower in the related Mortgage, no borrower, Operator or Facility is currently the subject of any proceeding by any governmental agency, and no notice of any violation has been received from a governmental agency that would, directly or indirectly, or with the passage of time: (1) Have a material adverse impact on any borrower's ability to accept and/or retain patients or result in the imposition of a fine, a sanction, a lower rate certification or a lower reimbursement rate for services rendered to eligible patients; (2) Modify, limit or annul or result in the transfer, suspension, revocation or imposition of probationary use of any borrower's Licenses; or (3) Affect any borrower's continued participation in the Medicaid or Medicare programs or any other of the Third-Party Payors' Programs, or any successor programs thereto, at current rate certifications. (H) Based upon representations and covenants in the Mortgage and, where available, certificates of government officials, each Facility and the use thereof complies in all material respects with all applicable local, state and federal building codes, fire codes, health care, nursing facility and other similar regulatory requirements (the "PHYSICAL PLANT STANDARDS") and no waivers of Physical Plant Standards exist at any of the Facilities. (I) Based upon representations and covenants in the Mortgage and, where available, certificates of government officials, no Facility has received a "Level A" (or equivalent) violation, and no statement of charges or deficiencies has been made or penalty enforcement action has been undertaken against any Facility, Operator or borrower, or against any officer, director or stockholder of any Operator or borrower by any governmental agency during the last three calendar years, and there have been no violations over the past three years which have threatened any Facility's, any Operator's or any borrower's certification for participation in Medicare or Medicaid or the other Third-Party Payors' Programs. (J) To the best of ICCC's knowledge and based on representations by each borrower in the related Mortgage, there are no current, pending or outstanding Medicaid, Medicare or Third- S-27 Party Payors' Programs reimbursement audits or appeals pending at any of the Facilities concerning allegations of fraud or that might have a material adverse effect on the operations of the Facility. (K) To the best of ICCC's knowledge and based on representations by each borrower in the related Mortgage, there are no current or pending Medicaid, Medicare or Third-Party Payors' Programs recoupment efforts at any of the Facilities that might have a material adverse effect on the operations of the Facility. (L) To the best of ICCC's knowledge and based on representations by each borrower in the related Mortgage, no borrower has pledged its receivables as collateral security for any other loan or indebtedness. (M) To the best of ICCC's knowledge and based on representations by each borrower in the related Mortgage, there are no patient or resident care agreements with patients or residents or with any other persons which deviate in any material adverse respect from the standard form customarily used at the Facilities. (N) The borrower has represented in the related Mortgage that all patient or resident records at each Facility, including patient or resident trust fund accounts, are true and correct in all material respects. (O) The borrower has represented in the related Mortgage that any existing agreement relating to the management or operation of any Facility with respect to any Facility is in full force and effect and is not in default by any party thereto. (P) The terms of each Mortgage require that no Facility, Operator or borrower shall, other than in the normal course of business, change the terms of any of the Third-Party Payors' Programs or its normal billing payment or reimbursement policies and procedures with respect thereto (including, without limitation, the amount and timing of finance charges, fees and write-offs) without the prior written consent of the holder of the Mortgage. The following terms have the following definitions for purposes of the above representations and warranties: "ASSIGNMENT OF LEASES AND RENTS" means, with respect to any Mortgage Loan, an assignment to the Mortgagee of all of the Borrower's rights to receive rental payments from the related Tenant pursuant to the related Lease, which assignment may be contained in the related Mortgage or in one or more separate documents duly executed by the Borrower in connection with the Mortgage Loan. In the case of any Mortgage Loan secured by more than one Mortgaged Property, the term "Assignment of Leases and Rents" shall refer to each Assignment of Leases and Rents relating to each such Mortgaged Property and such Mortgage Loan. "ASSIGNMENT OF MORTGAGE" means, with respect to any Mortgage Loan, an assignment of the Mortgage or equivalent instrument, in recordable form, by which ICCC assigns such Mortgage in connection with the transfer of the related Mortgage Loan. In the case of any Mortgage Loan secured by more than one Mortgage, the term "Assignment of Mortgage" shall refer to each Assignment of Mortgage relating to such Mortgage and such Mortgage Loan. "BORROWER" means a borrower or prospective borrower under a Mortgage Loan. "MORTGAGE FILE" means, with respect to each Mortgage Loan, the mortgage loan documents and any other documents relating to such Mortgage Loan, in each case to the extent they are delivered to the Custodian. "MORTGAGE LOAN SCHEDULE" means a schedule of Mortgage Loans delivered to the Custodian. "PERSON" means any individual, partnership, corporation, limited liability company, joint venture, trust or other entity. S-28 "REASSIGNMENT OF ASSIGNMENT OF LEASES AND RENTS" means, with respect to any Mortgage Loan, an assignment to the Custodian of the related Assignment of Leases and Rents, duly executed and in suitable form for recording in the jurisdiction in which the related Mortgaged Property is located. In the case of any Mortgage Loan secured by more than one Mortgaged Property, the term "Reassignment of Assignment of Leases and Rents" shall refer to each Reassignment of Assignment of Leases and Rents relating to each such Mortgaged Property and such Mortgage Loan. CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS All of the Mortgage Loans have Due Dates that occur on the first day of each month. All of the Mortgage Loans are secured by first liens on fee simple or leasehold interests in the related Mortgaged Properties. As of the Cut-off Date, the Mortgage Loans had characteristics set forth below. The totals in the following tables may not add due to rounding. S-29
MORTGAGE INTEREST RATES AS OF THE CUT-OFF DATE Percent by Percent by Aggregate Aggregate Number Number Principal Principal of of Balance as of Balance as of Mortgage Mortgage the Cut-off the Cut-off MORTGAGE RATE LOANS LOANS DATE DATE - ------------- ----- ----- ---- ---- Total 100.00% $ 100.00% ------- -------
Weighted Average Mortgage Interest Rate: _______%
PRINCIPAL BALANCES AS OF THE CUT-OFF DATE Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Principal Balances Mortgage Mortgage Balance as of Balance as of AS OF THE CUT-OFF DATE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE ---------------------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- -------
Average Principal Balance as of the Cut-off Date: $_____________
ORIGINAL TERM TO MATURITY IN MONTHS PERCENT BY PERCENT BY NUMBER AGGREGATE AGGREGATE NUMBER OF OF PRINCIPAL PRINCIPAL ORIGINAL TERM MORTGAGE MORTGAGE BALANCE AS OF BALANCE AS OF IN MONTHS LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE --------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- -------
WEIGHTED AVERAGE ORIGINAL TERM TO MATURITY IN MONTHS: ______
REMAINING TERM TO MATURITY IN MONTHS Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Remaining Term Mortgage Mortgage Balance as of Balance as of IN MONTHS LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE --------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- -------
Weighted Average Remaining Term to Maturity in Months: _______ S-30
MONTH AND YEAR OF ORIGINATION Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Mortgage Mortgage Balance as of Balance as of MONTH/YEAR LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE ---------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- ------
YEAR OF SCHEDULED MATURITY Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Mortgage Mortgage Balance as of Balance as of YEAR LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE ---- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- ------
__________ of the Mortgage Loans, representing ______% of the Mortgage Loans, as a percentage of the aggregate Principal Balance as of the Cut-off Date, are Balloon Mortgage Loans.
BALLOON MORTGAGE LOANS ORIGINAL TERM TO MATURITY IN MONTHS Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Original Term Mortgage Mortgage Balance as of Balance as of IN MONTHS LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE --------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- ------
Weighted Average Original Term to Maturity in Months: _____ S-31
BALLOON MORTGAGE LOANS REMAINING TERM TO MATURITY IN MONTHS Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Remaining Term Mortgage Mortgage Balance as of Balance as of IN MONTHS LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE --------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- ------
Weighted Average Remaining Term to Maturity in Months: _____ The following table sets forth the range of remaining amortization terms of each Balloon Mortgage Loan. The remaining amortization term of a Balloon Mortgage Loan represents the number of months required to fully amortize the Cut-off Balance of each Balloon Mortgage Loan.
BALLOON MORTGAGE LOANS REMAINING AMORTIZATION TERM Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Remaining Amortization Mortgage Mortgage Balance as of Balance as of TERM IN MONTHS LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE -------------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- ------
Weighted Average Remaining Amortization Term in Months: _____ The following two tables set forth the range of Cut-off Date LTV Ratios and Maturity Date LTV Ratios of the Mortgage Loans. A "CUT-OFF DATE LTV RATIO" is a fraction, expressed as a percentage, the numerator of which is the Cut-off Date Balance of a Mortgage Loan, and the denominator of which is the appraised value of the related Mortgaged Property as determined by an appraisal thereof obtained in connection with the origination of such Mortgage Loan. A "MATURITY DATE LTV RATIO" is a fraction, expressed as a percentage, the numerator of which is the principal balance of a Mortgage Loan on the related Maturity Date assuming all scheduled payments due prior thereto are made and there are no principal prepayments, and the denominator of which is the appraised value of the related Mortgaged Property as determined by an appraisal thereof obtained in connection with the origination of such Mortgage Loan. Because the value of Mortgaged Properties at the Maturity Date may be different than such appraisal value, there can be no assurance that the loan-to-value ratio for any Mortgage Loan determined at any time following origination thereof will be lower than the Cut-off Date LTV Ratio or Maturity Date LTV Ratio, notwithstanding any positive amortization of such Mortgage Loan. It is also possible that the market value of a Mortgaged Property securing a Mortgage Loan may decline between the origination thereof and the related Maturity Date. An appraisal of each of the Mortgaged Properties was made between __________ and ______________. It is possible that the market value of a Mortgaged Property securing a Mortgage Loan has declined since the most recent appraisal for such Mortgaged Property. All appraisals were obtained by the related Originator in accordance with the requirements of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended ("FIRREA"). S-32
CUT-OFF DATE LTV RATIOS Percent by Percent by Aggregate Aggregate Number of Number of Principal Principal Cut-off Date Mortgage Mortgage Balance as of Balance as of LTV RATIO LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - --------- ----- ----- ---------------- ---------------- 100.00% $ 100.00% ------- -------
Weighted Average Cut-off Date LTV Ratio: _________.
BALLOON MORTGAGE LOAN MATURITY DATE LTV RATIOS Percent by Percent by Aggregate Aggregate Number of Number of Principal Principal Maturity Date Mortgage Mortgage Balance as of Balance as of LTV RATIO LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - --------- ----- ----- ---------------- ---------------- 100.00% $ 100.00% ------- -------
Weighted Average Maturity Date LTV Ratio: _________. The following table sets forth the range of 199__ Debt Service Coverage Ratios for the Mortgage Loans. The "DEBT SERVICE COVERAGE RATIO" or "DSCR" for any Mortgage Loan for any period is the ratio of Net Operating Income produced by the related Mortgaged Property for such period covered by the operating statement for such period to the amounts of principal and interest due under such Mortgage Loan for the same period. The DSCRs for 199__ are for periods of 12 months or annualized based upon periods that range from 3 to 11 months. The DSCRs for 199__ and 199__ for each Mortgage Loan as set forth in Annex A hereto are for the entire fiscal year. Generally, "NET OPERATING INCOME" for a Mortgaged Property equals the operating revenues for such Mortgaged Property minus its operating expenses and replacement reserves, but without giving effect to debt service, depreciation, non-recurring capital expenditures, tenant improvements, leasing commissions and similar items. The operating statements for the Mortgaged Properties used in preparing the following table were obtained from the respective Mortgagors. The information contained therein was unaudited, and the Depositor has made no attempt to verify its accuracy. The information derived from these sources was not uniform among the Mortgage Loans. In some instances, adjustments were made to such operating statements principally for real estate tax and insurance expenses resulting in increases or decreases in net operating income stated therein based upon the Depositor's evaluation that more appropriate information was available. In addition, obvious capital expenditures were eliminated and replacement reserve estimates were incorporated for each S-33 property based on ICCC's standard underwriting ranges considering property age and improvements. The following ranges were utilized (by property type) in estimating the replacement reserve: office, $_______ to $_______ per net rentable square foot; multifamily (except student housing), $_______ to $_______ per unit; student housing, $------- to $_______ per unit; retail, $_______ to $_______ per net rentable square foot; industrial, $_______ to $_______ per net rentable square foot; hotel, ___% to ___% of gross income; self-storage, $_______ to $_______ per net rentable square foot; health care-related, $_______ to $_______ per bed; mobile home park, $_______ to $_______ per pad; and condominium, $_______ to $_______ per unit.
199___ DEBT SERVICE COVERAGE RATIOS Percent by Percent by Aggregate Aggregate Number of Number of Principal Principal Debt Service Mortgage Mortgage Balance as of Balance as of COVERAGE RATIO LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - -------------- ----- ----- ---------------- ---------------- 100.00% $ 100.00% ------- -------
Weighted Average Debt Service Coverage Ratio: _________. [Information on certain characteristics of certain specific Mortgage Loans to be provided here.] The Mortgage Loans are secured by Mortgaged Properties located in ______ different states. The table below sets forth the states in which the Mortgaged Properties are located:
GEOGRAPHIC DISTRIBUTION Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Mortgage Mortgage Balance as of Balance as of STATE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE ----- ----- ----- ---------------- ---------------- 100.00% $ 100.00% ------- -------
S-34
PROPERTY TYPES Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Mortgage Mortgage Balance as of Balance as of TYPE LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - ---- ----- ----- ---------------- ---------------- Multi-Family....................................... Retail -- with anchor tenant(1)..................... Hotel.............................................. Retail -- without anchor tenant(1).................. Health Care-Related................................ Office............................................. Industrial......................................... Mobile Home Park................................... Self-Storage....................................... Condominium Total.............................................. 100.00% $ 100.00% ------- -------
(1) For purposes of this table, the properties with an anchor tenant are as designated in Annex A. The anchor tenant, if any, is set forth in Annex A.
YEARS SINCE THE MORTGAGED PROPERTIES WERE BUILT (1) Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Property Age Mortgage Mortgage Balance as of Balance as of IN YEARS LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - -------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00%
Weighted Average Property Age in Years: _____ (1) See Annex A for the date on which the Mortgaged Property most recently underwent some degree of capital improvements. S-35
PHYSICAL OCCUPANCY PERCENTAGES (1) MULTIFAMILY AND MOBILE HOME PARKS Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Occupancy Mortgage Mortgage Balance as of Balance as of PERCENTAGES LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - ----------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- -------
Weighted Average Occupancy Percentage: ________% (1) See Annex A for dates as of which occupancy percentages were calculated for each Mortgaged Property.
PHYSICAL OCCUPANCY PERCENTAGES (1) RETAIL Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Occupancy Mortgage Mortgage Balance as of Balance as of PERCENTAGES LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - ----------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% Weighted Average Occupancy Percentage: __________%
(1) See Annex A for dates as of which occupancy percentages were calculated for each Mortgaged Property.
PHYSICAL DAILY OCCUPANCY PERCENTAGES (1) HOTEL Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Occupancy Mortgage Mortgage Balance as of Balance as of PERCENTAGES LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - ----------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- -------
Weighted Average Occupancy Percentage: ______% (1) See Annex A for the period over which occupancy percentages were calculated for each Mortgaged Property. S-36
PHYSICAL OCCUPANCY PERCENTAGES (1) OFFICE Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Occupancy Mortgage Mortgage Balance as of Balance as of PERCENTAGES LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - ----------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- -------
Weighted Average Occupancy Percentage: ___________% (1) See Annex A for dates as of which occupancy percentages were calculated for each Mortgaged Property.
PHYSICAL OCCUPANCY PERCENTAGES (1) OTHER Percent by Percent by Number Aggregate Aggregate Number of of Principal Principal Occupancy Mortgage Mortgage Balance as of Balance as of PERCENTAGES LOANS LOANS THE CUT-OFF DATE THE CUT-OFF DATE - ----------- ----- ----- ---------------- ---------------- Total 100.00% $ 100.00% ------- -------
Weighted Average Occupancy Percentage: ___________% (1) See Annex A for dates as of which occupancy percentages were calculated for each Mortgaged Property. With certain limited exceptions relating to casualty and condemnation proceeds, or other prepayments beyond the borrower's control, all of the Mortgage Loans prohibit the prepayment thereof until a date specified in the related Mortgage Note (such period, the "LOCK-OUT PERIOD" and the date of expiration thereof, the "LOCK-OUT DATE") and/or provide that upon any voluntary principal prepayment of a Mortgage Loan, the related Mortgagor will be required to pay a prepayment premium or yield maintenance penalty (a "PREPAYMENT PREMIUM"). The following table sets forth the percentage of the declining aggregate balance of all the Mortgage Loans that on June 1 of each of the years indicated will be within their related Lock-out Period and/or in which a principal prepayment must be accompanied by a Prepayment Premium. S-37
PREPAYMENT LOCK-OUT/PREPAYMENT PREMIUM ANALYSIS PERCENTAGE OF MORTGAGE LOANS BY OUTSTANDING PRINCIPAL BALANCE AS OF THE DATE INDICATED ASSUMING NO PREPAYMENTS JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE JUNE ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- CURRENT ------- Lock-out................... PREPAYMENT PREMIUM YIELD MAINTENANCE (1)...... 7.00 - 7.99% (2)......... 6.00 - 6.99% (2)......... 5.00 - 5.99% (2)......... 4.00 - 4.99% (2)......... 3.00 - 3.99% (2)......... 2.00 - 2.99% (2)......... 1.00 - 1.99% (2)......... 0.01 - 0.99% (2)......... NO PREPAYMENT PREMIUM...... TOTAL...................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% ====== AGGREGATE PRINCIPAL BALANCE OF THE MORTGAGE LOANS (3)....... PERCENTAGE OF CUT-OFF DATE PRINCIPAL BALANCE OF THE MORTGAGE LOANS OUTSTANDING.............. 100.0%
(1) THE MORTGAGE LOANS GENERALLY REQUIRE THE PAYMENT OF A PREPAYMENT PREMIUM IN CONNECTION WITH ANY PRINCIPAL PREPAYMENT, IN WHOLE OR IN PART. ANY PREPAYMENT PREMIUM WILL EQUAL THE PRESENT VALUE, AS OF THE DATE OF PREPAYMENT, OF THE REMAINING MONTHLY PAYMENTS FROM SUCH DATE OF PREPAYMENT THROUGH THE RELATED STATED MATURITY (INCLUDING THE BALLOON PAYMENT), DETERMINED BY DISCOUNTING SUCH PAYMENTS AT A U.S. TREASURY RATE SPECIFIED THEREIN, MINUS THE THEN OUTSTANDING BALANCE, SUBJECT TO A MINIMUM PREPAYMENT PREMIUM EQUAL TO 1% OF THE PRINCIPAL BALANCE OF SUCH MORTGAGE LOAN BEING PREPAID. (2) MORTGAGE LOAN REQUIRES A PREPAYMENT PREMIUM EQUAL TO INDICATED PERCENTAGE OF AMOUNT PREPAID. (3) MILLIONS OF DOLLARS. S-38 RELATED BORROWERS AND OTHER ISSUES [Description of certain borrowers and issues.] See Annex A for additional information on the Mortgage Loans. ESCROWS All of the Mortgage Loans except for _______ Mortgage Loans, representing ______% of the Mortgage Loans, provide for monthly escrows to cover property taxes on the Mortgaged Properties. Monthly escrows to cover insurance premiums on the Mortgaged Properties are also generally required, except with respect to Mortgage Loans originated by ________________________ where the Servicer provides force-placed coverage and monitors the related Mortgagor's compliance. _______ of the Mortgage Loans, which represent _______% of the Mortgage Loans also require monthly escrows to cover ongoing replacements and capital repairs. _________ of the Mortgage Loans, which represent ______% of the Mortgage Loans, also required upfront or monthly escrows for the full term or a portion of the term of the related Mortgage Loan to cover anticipated re-leasing costs, including tenant improvements and leasing commissions. See Annex A for additional information on the monthly escrows on the Mortgage Loans. UNDERWRITING GUIDELINES [DESCRIPTION OF UNDERWRITING GUIDELINES] ADDITIONAL INFORMATION A Current Report on Form 8-K (the "FORM 8-K") will be available to purchasers of the Offered Certificates and will be filed, together with the Pooling and Servicing Agreement, with the Securities and Exchange Commission within fifteen days after the initial issuance of the Offered Certificates. DESCRIPTION OF THE CERTIFICATES GENERAL The Certificates will be issued pursuant to the Pooling and Servicing Agreement and will include the following nine classes of Offered Certificates designated as the Class A1, Class A1X, Class A2, Class A2X, Class B, Class C, Class BCX, Class D and Class E Certificates. In addition to the Offered Certificates, the Certificates will also include the Class F, Class G, Class NR, Class R-I, Class R-II and Class R-III Certificates. Only the Offered Certificates are offered hereby. The Certificates represent in the aggregate the entire beneficial ownership interest in a Trust Fund consisting of: (i) a pool of fixed rate Mortgage Loans and all payments under and proceeds of the Mortgage Loans received after the Cut-off Date (exclusive of payments of principal and interest due on or before the Cut-off Date); (ii) any Mortgaged Property acquired on behalf of the Trust Fund through foreclosure or deed in lieu of foreclosure (upon acquisition, an "REO PROPERTY"); (iii) such funds or assets as from time to time are deposited in the Collection or Distribution Accounts or any account established in connection with REO Properties (the "REO ACCOUNT"); and (iv) the rights of the mortgagee under all insurance policies with respect to the Mortgage Loans. The Class A1, Class A1X, Class A2 and Class A2X Certificates will evidence approximately an initial ---% undivided interest in the Trust Fund. The Class B Certificates will evidence approximately an initial __% undivided interest in the Trust Fund. The Class C Certificates will evidence approximately an initial ___% undivided interest in the Trust Fund. The Class D Certificates will evidence approximately an initial ____% undivided interest in the Trust Fund. The Class E Certificates will evidence approximately an initial ___% undivided interest in the Trust Fund. S-39 The Class BCX Certificates consist of the following components: Class BCX component B and Class BCX component C. The Class BCX component B and Class BCX component C are not separately transferrable. The Offered Certificates (the "DTC REGISTERED CERTIFICATES") will be issued, maintained and transferred on the book-entry records of The Depository Trust Company ("DTC") and its Participants (as defined in the Prospectus). The DTC Registered Certificates, other than the Interest Only Certificates, will be issued in minimum denominations of $__________ and integral multiples of $____ in excess thereof. The Interest Only Certificates will be issued in denominations of $100,000 Notional Amount and integral multiples of $_____ Notional Amount. The DTC Registered Certificates will be represented by one or more certificates registered in the name of the nominee of DTC. The Company has been informed by DTC that DTC's nominee will be Cede & Co. ("CEDE"). No person acquiring an interest in the DTC Registered Certificates (a "BENEFICIAL OWNER") will be entitled to receive a certificate representing such person's interest (a "DEFINITIVE CERTIFICATE"), except as set forth below under "--Book-Entry Registration of Certain of the Senior Certificates -- Definitive Certificates." Unless and until Definitive Certificates are issued for the DTC Registered Certificates under the limited circumstances described herein, all references to actions by Certificateholders with respect to the DTC Registered Certificates shall refer to actions taken by DTC upon instructions from its Participants, and all references herein to distributions, notices, reports and statements to Certificateholders with respect to the DTC Registered Certificates shall refer to distributions, notices, reports and statements to DTC or Cede, as the registered holder of the DTC Registered Certificates, for distribution to Beneficial Owners by DTC in accordance with DTC procedures. BOOK-ENTRY REGISTRATION OF THE OFFERED CERTIFICATES GENERAL. Beneficial Owners that are not Participants or Intermediaries (as defined in the Prospectus) but desire to purchase, sell or otherwise transfer ownership of, or other interests in, the related DTC Registered Certificates may do so only through Participants and Intermediaries. In addition, Beneficial Owners will receive all distributions of principal of and interest on the related DTC Registered Certificates from the Trustee through DTC and Participants. Accordingly, Beneficial Owners may experience delays in their receipt of payments. Unless and until Definitive Certificates are issued for the related DTC Registered Certificates, it is anticipated that the only registered Certificateholder of such DTC Registered Certificates will be Cede, as nominee of DTC. Beneficial Owners will not be recognized by the Trustee or the Master Servicer as Certificateholders, as such term is used in the Pooling and Servicing Agreement; provided, however, that Beneficial Owners will be permitted to request and receive information furnished to Certificateholders by the Trustee subject to receipt by the Trustee of a certification in form and substance acceptable to the Trustee stating that the person requesting such information is a Beneficial Owner. Otherwise, the Beneficial Owners will be permitted to receive information furnished to Certificateholders and to exercise the rights of Certificateholders only indirectly through DTC, its Participants and Intermediaries. Under the rules, regulations and procedures creating and affecting DTC and its operations (the "RULES"), DTC is required to make book-entry transfers of DTC Registered Certificates among Participants and to receive and transmit distributions of principal of, and interest on, such DTC Registered Certificates. Participants and Intermediaries with which Beneficial Owners have accounts with respect to such DTC Registered Certificates similarly are required to make book-entry transfers and receive and transmit such distributions on behalf of their respective Beneficial Owners. Accordingly, although Beneficial Owners will not possess physical certificates evidencing their interests in the DTC Registered Certificates, the Rules provide a mechanism by which Beneficial Owners, through their Participants and Intermediaries, will receive distributions and will be able to transfer their interests in the DTC Registered Certificates. None of the Depositor or the Trustee will have any liability for any actions taken by DTC or its nominee, including, without limitation, actions for any aspect of the records relating to or payments made on account of beneficial ownership interests in the DTC Registered Certificates held by Cede, as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. DEFINITIVE CERTIFICATES. Definitive Certificates will be issued to Beneficial Owners or their nominees, respectively, rather than to DTC or its nominee, only under the limited conditions set forth in the Prospectus under "Description of the Certificates -- Book-Entry Registration and Definitive Certificates." S-40 Upon the occurrence of an event described in the Prospectus in the seventh paragraph under "Description of the Certificates -- Book-Entry Registration and Definitive Certificates," the Trustee is required to notify, through DTC, Participants who have ownership of DTC Registered Certificates as indicated on the records of DTC of the availability of Definitive Certificates for their DTC Registered Certificates. Upon surrender by DTC of the definitive certificates representing the DTC Registered Certificates and upon receipt of instructions from DTC for re-registration, the Trustee will reissue the DTC Registered Certificates as Definitive Certificates issued in the respective principal amounts owned by individual Beneficial Owners, and thereafter the Trustee and the Master Servicer will recognize the holders of such Definitive Certificates as Certificateholders under the Pooling and Servicing Agreement. For additional information regarding DTC and the DTC Registered Certificates, see "Description of the Certificates -- Book-Entry Registration and Definitive Certificates" in the Prospectus. DISTRIBUTIONS METHOD, TIMING AND AMOUNT. Distributions on the Certificates will be made on the [25th] day of each month or, if such [25th] day is not a business day, then on the next succeeding business day, commencing in ________ 199__ (each, a "DISTRIBUTION DATE"). All distributions (other than the final distribution on any Certificate) will be made by the Trustee to the persons in whose names the Certificates are registered at the close of business on each Record Date, which will be the last business day of the month preceding the month in which the related Distribution Date occurs. Such distributions will be made by wire transfer in immediately available funds to the account specified by the Certificateholder at a bank or other entity having appropriate facilities therefor, if such Certificateholder will have provided the Trustee with wiring instructions as provided in the Pooling and Servicing Agreement and is the registered holder of Certificates with an initial aggregate denomination of at least $__________ or, otherwise, by check. The final distribution on any Certificate will be made in like manner, but only upon presentment or surrender of such Certificate at the location specified in the notice to the holder thereof of such final distribution. All distributions made with respect to a class of Certificates on each Distribution Date will be allocated pro rata among the outstanding Certificates of such class based on their respective Percentage Interests. The "PERCENTAGE INTEREST" evidenced by any Certificate is equal to the initial denomination thereof as of the Delivery Date, divided by the initial Class Balance or Notional Amount, as applicable, for such class. The aggregate distribution to be made on the Certificates on any Distribution Date shall equal the Available Distribution Amount. The "AVAILABLE DISTRIBUTION AMOUNT" for any Distribution Date is an amount equal to (a) the sum of (i) the amount on deposit in the Primary Collection Account (as defined herein) as of the close of business on the related Determination Date, which amount will include scheduled payments on the Mortgage Loans due on or prior to the related Due Date immediately preceding, and collected as of, such Determination Date (to the extent not distributed on previous Distribution Dates) and unscheduled payments and other collections on the Mortgage Loans collected during the related Remittance Period and (ii) the aggregate amount of any P&I Advances made by each Servicer in respect of such Distribution Date (not otherwise included in clause (i) above) net of (b) the portion of the amount described in clause (a)(i) hereof that represents (i) Monthly Payments due on a Due Date subsequent to the end of the related Remittance Period, (ii) any amounts payable or reimbursable therefrom to any Servicer or the Trustee or (iii) any servicing and trustee compensation. PASS-THROUGH RATE ON THE CERTIFICATES. The "PASS-THROUGH RATES" on the Class A1 and Class A2 Certificates are fixed and are set forth on the cover hereof. The Pass-Through Rates on the Class A1X, Class A2X, Class B and Class C Certificates will be equal to the weighted average of the Remittance Rates in effect from time to time on the Mortgage Loans minus the Pass-Through Rates on the Class A1 and Class A2 Certificates, respectively. The Class BCX Certificates will be entitled to interest at the Pass-Through Rate on the components. The Pass-Through Rate on the Class BCX component B is _______% per annum and on the Class BCX component C is _______% per annum. The Pass-Through Rates on the Class D and Class E Certificates will be equal to the weighted average of the Remittance Rates in effect from time to time on the Mortgage Loans. The "REMITTANCE RATE" for any Mortgage Loan is equal to the excess of the Mortgage Interest Rate thereon (without giving effect to any modification or other reduction thereof following the Cut-off Date) over the sum of the applicable Servicing Fee Rate and the fee payable to the Trustee. The fee payable to the Trustee will be _______% per annum. The Mortgage Interest Rate for each of the Mortgage Loans which provide for the computation of interest other than on the basis of a 360-day year consisting of twelve 30-day months (a "30/360 BASIS") (that is the basis on which interest on the Certificates accrues) will be adjusted to reflect that difference. S-41 INTEREST DISTRIBUTIONS ON THE CERTIFICATES. Subject to the distribution of the Principal Distribution Amount to the Holders of classes of Certificates of a higher priority, as described under "Priority of Distributions" below, Holders of each class of Certificates will be entitled to receive on each Distribution Date, to the extent of the Available Distribution Amount for such Distribution Date (net of any interest accrued on any Collateral Value Adjustment subsequently recovered and any Net Prepayment Premium) (the "ADJUSTED AVAILABLE DISTRIBUTION AMOUNT"), distributions allocable to interest in an amount (the "INTEREST DISTRIBUTION AMOUNT") equal to the sum of interest accrued during the period from and including the first day of the month preceding the month of the Distribution Date) (or from the Cut-off Date in the case of the initial Distribution Date) to and including the last day of the month preceding the month of the Distribution Date (calculated on the basis of a 360-day year consisting of twelve 30-day months) on the Class Balance (or the Notional Amount, in the case of the Interest Only Certificates, or the related components) of such class of Certificates or such components, as the case may be, outstanding immediately prior to such Distribution Date, at the then-applicable Pass-Through Rate (the "INTEREST ACCRUAL AMOUNT") less such class' (or component's) pro rata share, by Interest Accrual Amount, of any interest shortfall not related to a Mortgagor delinquency or default, such as Prepayment Interest Shortfalls (as defined herein) and shortfalls associated with exemptions provided by the Relief Act (as defined in the Prospectus). The Notional Amount of the Class A1X Certificates will equal the Class Balance of the Class A1 Certificates. The Notional Amount of the Class A2X Certificates will equal the Class Balance of the Class A2 Certificates. The Notional Amount of the Class BCX component B Certificates will equal the Class Balance of the Class B Certificates. The Notional Amount of the Class BCX component C Certificates will equal the Class Balance of the Class C Certificates. A Notional Amount does not entitle the Interest Only Certificates (or any component thereof) to any distributions of principal. If the Adjusted Available Distribution Amount for any Distribution Date is less than the Interest Distribution Amount for such Distribution Date, the shortfall will be part of the Interest Distribution Amount distributable to holders of Certificates affected by such shortfall on subsequent Distribution Dates, to the extent of available funds. Any such shortfall will bear interest at the related Pass-Through Rate. To the extent not necessary to reimburse the Master Servicer for reductions in its compensation to cover Prepayment Interest Shortfalls, in addition to the related Interest Distribution Amount, the Interest Only Certificates will receive _____%, and the remaining Offered Certificates will receive ____%, of any Net Prepayment Premium paid with respect to the Mortgage Loans. The Net Prepayment Premium payable to the Interest Only Certificates will be paid to the holders of the Class A1X Certificates while the Class A1 Certificates are outstanding. On each Distribution Date after the Distribution Date on which the Class Balances of the Class A1 Certificates has been reduced to zero, any Net Prepayment Premium payable to the Interest Only Certificates will be paid to the holders of the Class A2X Certificates while the Class A2 Certificates are outstanding. On each Distribution Date after the Distribution Date on which the Class Balances of the Class A1 and Class A2 Certificates have been reduced to zero, any Net Prepayment Premium payable to the Interest Only Certificates will be paid to the holders of the Class BCX Certificates while the Class B or Class C Certificates are outstanding. No portion of the Net Prepayment Premium will be payable to the Interest Only Certificates after the Distribution Date on which the Class Balances of the Class A1, Class A2, Class B and Class C Certificates have been reduced to zero. On each Distribution Date, the Net Prepayment Premium not payable to the Master Servicer or the holders of the Interest Only Certificates will be paid the holders of the class of Offered Certificates then outstanding with the highest principal payment priority. To the extent any Mortgage Loan is prepaid in full or in part between a Determination Date and the related Due Date immediately following such Determination Date, an interest shortfall may result on the second Distribution Date following such Determination Date because interest on prepayments in full or in part will only accrue to the date of payment (such shortfall, a "PREPAYMENT INTEREST SHORTFALL"). To the extent any Mortgage Loan is prepaid in full or in part between the related Due Date and the Determination Date immediately following such Due Date, the interest on such prepayment will be included in the Available Distribution Amount for the immediately succeeding Distribution Date (the "PREPAYMENT INTEREST EXCESS"). If a Mortgage Loan is prepaid in full or in part during any Remittance Period, any related Prepayment Interest Shortfall shall be offset to the extent of any Prepayment Interest Excess and any Prepayment Premium collected during such Remittance Period. If the Prepayment Interest Shortfall for any Remittance Period exceeds any Prepayment Interest Excess and any Prepayment Premiums collected during such period, such shortfall shall only be offset by an amount up to the portion of the Servicing Fee payable to the Master Servicer on the related Distribution Date. To the extent that any such shortfall shall have been offset by a portion of the Servicing Fee, the Master Servicer shall be entitled to any excess of the Prepayment Interest Excess and Prepayment Premiums over the Prepayment Interest Shortfall for any subsequent period. S-42 The "NET PREPAYMENT PREMIUM" with respect to any Distribution Date will equal the excess of (a) the total amount of Prepayment Premiums received during the related Remittance Period over (b) the Prepayment Interest Shortfall for any Remittance Period over the Prepayment Interest Excess for any Remittance Period. The Pass-Through Rates on the Certificates with variable Pass-Through Rates will not be affected by the deferral of interest or reduction of the Mortgage Interest Rate on any Mortgage Loan by the Special Servicer or by the occurrence of either such event in connection with any bankruptcy proceeding involving the related borrower. The amount of any resulting interest shortfall will be allocated to the Certificates, in the order described under "Subordination" below. PRINCIPAL DISTRIBUTIONS ON THE OFFERED CERTIFICATES. Holders of the Certificates will be entitled to receive on each Distribution Date in reduction of the related Class Balance in the order described herein until the related Class Balance is reduced to zero, to the extent of the balance of the Adjusted Available Distribution Amount remaining after the payment of the Interest Distribution Amount for such Distribution Date for the classes of Certificates with the highest priority for interest payments (as described under "Priority of Distributions' below), distributions in respect of principal in an amount (the "PRINCIPAL DISTRIBUTION AMOUNT") equal to the aggregate of (i) all scheduled payments of principal (other than Balloon Payments) due on the Mortgage Loans on the related Due Date whether or not received and all scheduled Balloon Payments received, (ii) if the scheduled Balloon Payment is not received, with respect to any Balloon Mortgage Loans on and after the Maturity Date thereof, the principal payment that would need to be received in the related month in order to fully amortize such Balloon Mortgage Loan with level monthly payments by the end of the term used to derive scheduled payments of principal due prior to the related Maturity Date, (iii) to the extent not previously advanced any unscheduled principal recoveries received during the related Remittance Period in respect of the Mortgage Loans, whether in the form of liquidation proceeds, insurance proceeds, condemnation proceeds or amounts received as a result of the purchase of any Mortgage Loan out of the Trust Fund and (iv) any other portion of the Adjusted Available Distribution Amount remaining undistributed after payment of any interest payable on the Certificates for the related or any prior Distribution Date, including any Prepayment Interest Excess not offset by any Prepayment Interest Shortfall occurring during the related Remittance Period or otherwise required to reimburse the Master Servicer, as described herein, and interest distributions on the Mortgage Loans, in excess of interest distributions on the Certificates, resulting from the allocation of amounts described in this clause (iv) to principal distributions on the Certificates. The Interest Only Certificates do not have a Class Balance and are therefore not entitled to any principal distributions. PRIORITY OF DISTRIBUTIONS The Adjusted Available Distribution Amount for each Distribution Date will be applied (a) first to distributions of interest on the classes of Certificates outstanding with the highest priority for interest payment (as described below), (b) second to distributions of the Principal Distribution Amount to the classes of Certificates then entitled to distribution of principal as described below, and (c) third, to distributions of interest on each class of Certificates other than the classes described in clause (a), above, in the order of priority described below; provided that on any Distribution Date on which the Class Balance of a class of Certificates is reduced to zero pursuant to clause (b) above, interest distributions pursuant to clause (a) above will be made to the class of Certificates outstanding with the next highest priority for interest payments prior to making distributions of the Principal Distribution Amount thereto pursuant to clause (b) above. The priority for interest payments for purposes of clauses (a) and (c), above, is: first to distributions of interest on the Class A1, Class A1X, Class A2 and Class A2X Certificates, pro rata, based on their respective Interest Accrual Amounts; second to distributions of interest on the Class B and Class BCX component B Certificates, pro rata, based on their respective Interest Accrual Amounts; third to distributions of interest on the Class C and Class BCX component C Certificates, pro rata, based on their respective Interest Accrual Amounts; fourth to distributions of interest on the Class D Certificates; fifth to distributions of interest on the Class E Certificates; and then to the remaining classes of Certificates up to their respective Interest Accrual Amounts, all as described under "--Distributions -- Interest Distributions on the Certificates" above. The Principal Distribution Amount for such Distribution Date will be applied to distributions of principal of the Class A1, Class A2, Class B, Class C, Class D and Class E Certificates, in that order, and then to distributions of principal of the Other Classes of Certificates until their respective Class Balances have been reduced to zero. S-43 OTHER CERTIFICATES The Class F, Class G, Class NR, Class R-I, Class R-II and Class R-III Certificates are not offered hereby. The Pass-Through Rates on the Class F, Class G and Class NR Certificates will equal the weighted average of the Remittance Rates in effect from time to time on the Mortgage Loans. The Class Balances on the Class F, Class G and Class NR Certificates will equal $___________, $___________, and $___________, respectively, and approximately $_____________, in the aggregate. The Class R-I, Class R-II and Class R-III Certificates will not have a Pass-Through Rate or a Class Balance. SUBORDINATION Neither the Offered Certificates nor the Mortgage Loans are insured or guaranteed against losses suffered on the Mortgage Loans by any government agency or instrumentality or by the Depositor, the Trustee, the Master Servicer, the Special Servicer, the Primary Servicers, or any affiliate thereof. In addition to the payment priorities described under "--Priority of Distributions" above, certain Certificates will be subordinated to other Certificates with respect to the allocation of Realized Losses. Realized Losses on the Mortgage Loans will be allocated, first, to the Other Certificates, second, to the Class E Certificates, third, to the Class D Certificates, fourth, to the Class C Certificates, fifth, to the Class B Certificates, in each case until the related Class Balance is reduced to zero; and thereafter, to the Class A1 and Class A2 Certificates. The Class Balance of a class of Certificates will be reduced by the principal portion of any Realized Losses allocated to such class. In addition to Realized Losses, shortfalls will also occur as a result of each Servicer's right to receive payments of interest with respect to unreimbursed advances, the Special Servicer's right to compensation with respect to Mortgage Loans which are or have been Specially Serviced Mortgage Loans and as a result of other Trust Fund expenses. Such shortfalls will be allocated as described above to the classes of Certificates with the lowest payment priority for purposes of the application of Available Distribution Amount in the order described herein. Within 30 days after the earliest to occur of (i) 90 days after the date on which an uncured delinquency occurs in respect of a Mortgage Loan, (ii) 60 days after the date on which a receiver is appointed (if such appointment remains in effect during such 60-day period) in respect of a Mortgaged Property, (iii) as soon as reasonably practical after the date on which a Mortgaged Property becomes an REO Property or (iv) the date on which a change in the payment rate, Mortgage Interest Rate, principal balance, amortization terms or Maturity Date of any Specially Serviced Mortgage Loan becomes effective, an appraisal will be obtained by the Special Servicer from an independent MAI appraiser at the expense of the Trust Fund (except if an appraisal has been conducted within the 12 month period preceding such event). As a result of such appraisal, a Collateral Value Adjustment may result, which Collateral Value Adjustment will be allocated, for purposes of determining distributions of interest to the Certificates, in the manner and priority described above with respect to Realized Losses. Notwithstanding the foregoing, a Collateral Value Adjustment will be zero with respect to such a Mortgage Loan if (i) the event giving rise to such Collateral Value Adjustment is the extension of the maturity of such Mortgage Loan, (ii) the payments on such Mortgage Loan were not delinquent during the twelve month period immediately preceding such extension and (iii) the payments on such Mortgage Loan are then current, provided, that if at any later date there occurs a delinquency in payment with respect to such Mortgage Loan, the Collateral Value Adjustment will be recalculated and applied to the same extent as it would have been previously applied. In addition, in any case, upon the occurrence of any event giving rise to a subsequent Collateral Value Adjustment (including the delinquency referred to in the immediately preceding sentence) more than twelve months after an appraisal was obtained with respect to a Collateral Value Adjustment, the Special Servicer will order a new appraisal as described above, within 30 days of the occurrence of any such event giving rise to a subsequent Collateral Value Adjustment and will adjust the amount of the Collateral Value Adjustment in accordance therewith. The "COLLATERAL VALUE ADJUSTMENT" for any Distribution Date with respect to any Mortgage Loan will be an amount equal to the excess of (a) the principal balance of such Mortgage Loan over (b) the excess of (i) 90% of the current appraised value of the related Mortgaged Property as determined by an independent MAI appraisal of such Mortgaged Property over (ii) the sum of (A) to the extent not previously advanced by a Servicer, all unpaid interest on such Mortgage Loan at a per annum rate equal to the Mortgage Interest Rate, (B) all unreimbursed Advances and interest thereon, and (C) any unpaid Servicing and Trustee fees and (D) all currently due and delinquent real estate taxes and assessments, insurance premiums and, if applicable, ground rents in respect of such Mortgaged Property (net of any S-44 amount escrowed or otherwise available for payment of the amount due on such Mortgage Loan). The excess of the principal balance of any Mortgage Loan over the related Collateral Value Adjustment is referred to herein as the "ADJUSTED COLLATERAL VALUE". A Collateral Value Adjustment shall result in a reduction of the Class Balance (or Notional Amount) of any class of Certificates solely for the purposes specified herein and shall not be a permanent reduction of the Class Balance (or Notional Amount) of any class of Certificates prior to the occurrence of a Realized Loss. A "REALIZED LOSS", in the case of any Mortgage Loan described in clause (a) or clause (b) of the succeeding sentence, is equal to the sum of (a) the Stated Principal Balance of any Loss Mortgage Loan, (b) interest thereon not previously distributed to Certificateholders through the last day of the month in which such Mortgage Loan became a Loss Mortgage Loan, (c) any advances made by any Servicer which remain unreimbursed and (d) any interest accrued on such advances (see "--Advances" below) as of such time, reduced by any amounts recovered thereon as of such time and, in the case of any Mortgage Loan described in clause (c) of the succeeding sentence, is the amount determined to have been permanently forgiven as described in such clause (c). A "LOSS MORTGAGE LOAN" is any Mortgage Loan (a) which is finally liquidated, (b) with respect to which the Master Servicer or the Special Servicer has determined that an advance which has been made or would otherwise be required to be made, is not, or, if made, would not be, recoverable out of proceeds on such Mortgage Loan or (c) with respect to which a portion of the principal balance thereof has been permanently forgiven whether pursuant to a modification or a valuation resulting from a proceeding initiated under the Bankruptcy Code. The "STATED PRINCIPAL BALANCE" of any Mortgage Loan as of any date of determination is the principal balance as of the Cut-off Date minus the sum of (i) the principal portion of each Monthly Payment due on such Mortgage Loan after the Cut-off Date, to the extent received from the Mortgagor or advanced and distributed to Certificateholders, and (ii) any unscheduled amounts of principal received with respect to such Mortgage Loans, to the extent distributed to Certificateholders. To the extent any amount on a Mortgage Loan with respect to which a Collateral Value Adjustment was required is recovered in excess of the Adjusted Collateral Value (after giving effect to all other amounts previously collected with respect thereto), such amount will be distributed to each holder of a class of Certificates to which a Collateral Value Adjustment has been allocated, in the order of payment described hereinabove up to an amount equal to interest accrued on the sum of any Collateral Value Adjustment allocated to such class of Certificates (or component) in reduction of the Class Balance (or Notional Amount) thereof at the Pass-Through Rate in effect during such applicable Collection Period from the date of such allocation to the end of the Collection Period in which such an amount is recovered. The Class Balance (or Notional Amount) of each such class (or component) shall be increased by the amount of such excess over such interest payment in the order of payment described hereinabove. Any reduction of the Class Balance (or Notional Amount) of a class (or component) of Certificates following a Collateral Value Adjustment and any increase thereof following an excess recovery will affect the Percentage Interest and the calculation of any interest or voting right of such class of Certificates. ADVANCES On the business day immediately preceding each Distribution Date, the Master Servicer will be obligated to make advances out of its own funds or funds held in the Master Collection Account (as defined herein) that are not required to be part of the Available Distribution Amount for such Distribution Date or to remit any advances made by the related Primary Servicer or the Special Servicer ("P&I ADVANCES"), in an amount equal to the excess of all Monthly Payments (net of the Servicing Fee) due over the amount actually received, subject to the limitations described herein. In addition, each Servicer will be required to advance certain property related expenses. The Servicers generally may not advance any amounts, other than P&I Advances, unless such advance is contemplated in the related Asset Strategy Report (as defined herein) for the related Mortgage Loan or such advance is for one of several purposes specified in the Pooling and Servicing Agreement as "PROPERTY PROTECTION EXPENSES". All such advances will be reimbursable to the related Servicer from late payments, insurance proceeds, liquidation proceeds, condemnation proceeds or amounts paid in connection with the purchase of such Mortgage Loan or, as to any such advance that is deemed not otherwise recoverable, from any amounts on deposit in the Primary Collection Account or the Master Collection Account to the extent such amounts are not required to be otherwise applied pursuant to the terms of the related Mortgage Loan. Notwithstanding the foregoing, the Master Servicer will be obligated to make any such advance only to the extent that it determines in its reasonable good faith judgment that such advance, if made, would be recoverable out of net proceeds (including any amounts escrowed with respect to the related Mortgage Loan net of any reasonably anticipated expenses payable therefrom) on the related Mortgage Loan. None of the Servicers will be required to advance the full amount S-45 of any Balloon Payment not made by the related Mortgagor. To the extent a Servicer is required to make a P&I Advance on and after the Due Date for such Balloon Payment, such P&I Advance shall not exceed an amount equal to a monthly payment calculated by the Special Servicer necessary to fully amortize the related Mortgage Loan over the period used for purposes of calculating the scheduled monthly payments thereon prior to the related Maturity Date. Any failure by the Master Servicer to make an advance as required under the Pooling and Servicing Agreement will constitute an event of default thereunder, in which case the Trustee will be obligated to make any required advance, in accordance with the terms of the Pooling and Servicing Agreement. Each Servicer shall be entitled to interest on the aggregate amount of all advances made by such Servicer at a per annum rate equal to the prime rate reported in The Wall Street Journal. See "Risk Factors -- Effect of Mortgagor Delinquencies and Defaults" herein. CERTAIN PREPAYMENT, MATURITY AND YIELD CONSIDERATIONS GENERAL The yield to maturity on the Offered Certificates will be affected by the rate of principal payments on the Mortgage Loans including, for this purpose, prepayments, which may include amounts received by virtue of repurchase, condemnation, casualty or foreclosure. The rate of principal payments on the Offered Certificates will correspond to the rate of principal payments (including prepayments) on the related Mortgage Loans. Each Mortgage Loan either prohibits voluntary prepayments during a certain number of years following the origination thereof and/or allows the related Mortgagor to prepay the principal balance thereof in whole during a certain number of years following the origination if accompanied by payment of a Prepayment Premium. See Annex A hereto and the table entitled "Prepayment Lock-out/Prepayment Premium Analysis" under "Description of the Mortgage Pool -- Certain Characteristics of the Mortgage Loans" herein. Any Net Prepayment Premium collected on a Mortgage Loan will be distributed to the holders of the Interest Only Certificates as described herein. See "Description of the Certificates -- Distributions -- Interest Distributions on the Certificates" and "Certain Prepayment, Maturity and Yield Considerations" herein, and "Yield Considerations" in the Prospectus. The yield to maturity on each class of the Offered Certificates will depend on, among other things, the rate and timing of principal payments (including prepayments, defaults, liquidations and purchases of Mortgage Loans due to a breach of a representation and warranty) on the Mortgage Loans and the allocation thereof to reduce the Class Balance or Notional Amount of such class or its components. The yield to maturity on each class of the Offered Certificates will also depend on the Pass-Through Rate and the purchase price for such Certificates. The yield to investors on any Class of Offered Certificates will be adversely affected by any allocation thereto of Prepayment Interest Shortfalls on the Mortgage Loans, which may result from the distribution of interest only to the date of a prepayment occurring during any month following the related Determination Date (rather than a full month's interest) to the extent any such interest shortfall is not offset by Prepayment Premiums, any Prepayment Interest Excess or the portion of the Servicing Fee for such Distribution Date allocable to the Master Servicer. In general, if a class of Offered Certificates is purchased at a premium and principal distributions thereon occur at a rate faster than anticipated at the time of purchase, the investor's actual yield to maturity will be lower than that assumed at the time of purchase. Conversely, if a class of Offered Certificates is purchased at a discount and principal distributions thereon occur at a rate slower than that assumed at the time of purchase, the investor's actual yield to maturity will be lower than that assumed at the time of purchase. If a Mortgage Loan becomes a Specially Serviced Mortgage Loan, the Special Servicer may adopt a servicing strategy which affects the yield to maturity of one or more classes of Offered Certificates. The Rated Final Distribution Date for the Certificates will be _____________, 20___ which is the second anniversary of the date at which all the Mortgage Loans have zero balances, assuming no prepayments and that the Mortgage Loans which are Balloon Loans fully amortize according to their amortization schedule and no Balloon Mortgage Payment is made. S-46 WEIGHTED AVERAGE LIFE OF THE OFFERED CERTIFICATES Weighted average life refers to the average amount of time from the date of issuance of a security until each dollar of principal of such security will be repaid to the investor. The weighted average life of the Offered Certificates will be influenced by the rate at which principal payments (including scheduled payments, principal prepayments and payments made pursuant to any applicable policies of insurance) on the Mortgage Loans are made. Principal payments on the Mortgage Loans may be in the form of scheduled amortization or prepayments (for this purpose, the term "prepayment" includes prepayments, partial prepayments and liquidations due to a default or other dispositions of the Mortgage Loans). The table of Percent of Initial Certificate Balance Outstanding for the Class A1, Class A2, Class B, Class C, Class D and Class E Certificates at the respective percentages of CPR set forth below indicates the weighted average lives of such Certificates and sets forth the percentage of the initial principal amount of such Certificates that would be outstanding after each of the dates shown at the indicated percentages of CPR. The table has been prepared on the basis of the characteristics of the Mortgage Loans set forth in Annex A and on the basis of the following assumptions: (i) the Mortgage Loans prepay at the indicated percentage of CPR when the Mortgage Loans are no longer in their respective Lock-out Periods; (ii) the maturity date of each of the Balloon Mortgage Loans is not extended; (iii) distributions on the Offered Certificates are received in cash, on the 25th day of each month, commencing in ______________; (iv) no defaults or delinquencies in, or modifications, waivers or amendments respecting, the payment by the Mortgagors of principal and interest on the Mortgage Loans occur; (v) prepayments represent payment in full of individual Mortgage Loans and are received on the respective Due Dates and include a month's interest thereon; (vi) there are no repurchases of Mortgage Loans due to breaches of any representation and warranty, or pursuant to an optional termination as described under "Description of the Pooling and Servicing Agreement -- Termination" herein or otherwise; and (vii) the Offered Certificates are purchased on ______________. Based on the foregoing assumptions, the table indicates the weighted average lives of the Class A1, Class A2, Class B, Class C, Class D and Class E Certificates and sets forth the percentages of the initial Class Balance of each such class of Offered Certificates that would be outstanding after the Distribution Date in _________ of each of the years indicated, at various percentages of CPR. Neither CPR nor any other prepayment model or assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of mortgage loans, including the Mortgage Loans included in the Mortgage Pool. Variations in the actual prepayment experience and the balance of the Mortgage Loans that prepay may increase or decrease the percentage of initial Class Balance (and weighted average life) shown in the following table. Such variations may occur even if the average prepayment experience of all such Mortgage Loans is the same as any of the specified assumptions. S-47
PERCENT OF INITIAL CLASS BALANCE OUTSTANDING AT THE FOLLOWING PERCENTAGES OF CPR CLASS A CLASS A2 CLASS B DISTRIBUTION ------- -------- ------- DATE 0% % % % 0% % % % 0% % % % ---- -- -- -- -- -- -- -- -- -- -- -- --
Initial Percentage WAL(1)
CLASS A CLASS A2 CLASS B DISTRIBUTION ------- -------- ------- DATE 0% % % % 0% % % % 0% % % % ---- -- -- -- -- -- -- -- -- -- -- -- --
Initial Percentage WAL(1) (1) The weighted average life of a class of Offered Certificates is determined by (i) multiplying the amount of each distribution of principal by the number of years from the date of issuance to the related Distribution Date, (ii) adding the results and (iii) dividing the sum by the total principal distributions on such class of Certificates. INTEREST ONLY CERTIFICATES YIELD CONSIDERATIONS The sensitivity of the yield to maturity on the Interest Only Certificates to both the timing of receipt of prepayments and the overall rate of principal prepayments and defaults on the Mortgage Loans will be offset to some extent by the payment of a portion of any Net Prepayment Premium to the Interest Only Certificates entitled thereto. No such offset is available following a default on a Mortgage Loan. The following tables indicate the sensitivity of the pre-tax yield to maturity on the Interest Only Certificates to various constant rates of prepayment on the Mortgage Loans by projecting the monthly aggregate payments on the Interest Only Certificates and computing the corresponding pre-tax yields to maturity on a corporate bond equivalent basis, based on the assumptions described in clauses (i) through (vii) in the second paragraph preceding the table entitled "Percent of Initial Class Balance Outstanding at the Following Percentages of CPR" under the heading "Certain Prepayment, Maturity and Yield Considerations -- Weighted Average Life of the Offered Certificates" above, including the assumptions regarding the performance of the Mortgage Loans which may differ from the actual performance thereof and assuming the aggregate purchase prices and Pass-Through Rates set forth below and assuming further that the initial Notional Amounts of the Interest Only Certificates are as set forth herein. The yield maintenance calculations are based on the market yield on ____________ of actively traded Treasury securities of appropriate maturities. ____% of any Net Prepayment Premium will be allocated to the Class A1X Certificates through the Distribution Date on which the Class Balance of the Class A1 Certificates has been reduced to zero. Thereafter, ____% of any Net Prepayment Premium will be allocated to the Class A2X Certificates through the Distribution Date on which the Class Balance of the Class A2 Certificates has been reduced to zero. Thereafter, ____% of any Net Prepayment Premium will be allocated to the Class BCX Certificates through the Distribution Date on which the Class Balances of the Class B and Class C Certificates have been reduced to zero. Any differences between such assumptions and the actual characteristics and performance of the Mortgage Loans and of the Certificates may result in yields being different from those shown in such tables. Discrepancies between assumed and actual characteristics and performance underscore the hypothetical nature of the tables, which are provided only to give a general sense of the sensitivity of yields in varying prepayment scenarios. S-48
PRE-TAX YIELD TO MATURITY OF THE CLASS A1X CERTIFICATES ASSUMED PURCHASE PRICE AS A PERCENTAGE OF THE CPR PREPAYMENT ASSUMPTION RATES NOTIONAL AMOUNT ASSUMED PASS-THROUGH RATE(1) 0% % % % % % % % % %
(1) Calculated based on the weighted average of the Remittance Rates of the Mortgage Loans as of the Cut-off Date. The Pass-Through Rate on such Certificates will be subject to adjustment on each Distribution Date.
PRE-TAX YIELD TO MATURITY OF THE CLASS A2X CERTIFICATES ASSUMED PURCHASE PRICE CPR PREPAYMENT ASSUMPTION RATES AS A PERCENTAGE OF THE NOTIONAL AMOUNT ASSUMED PASS-THROUGH RATE(1) 0% % % % % % % % % %
(1) Calculated based on the weighted average of the Remittance Rates of the Mortgage Loans as of the Cut-off Date. The Pass-Through Rate on such Certificates will be subject to adjustment on each Distribution Date.
PRE-TAX YIELD TO MATURITY OF THE CLASS BCX CERTIFICATES ASSUMED PURCHASE PRICE AS A PERCENTAGE OF THE CPR PREPAYMENT ASSUMPTION RATES NOTIONAL AMOUNT OF EACH COMPONENT ASSUMED PASS-THROUGH RATE(2) 0% % % % % % % % % %
(2) Calculated based on the initial weighted average of the Pass-Through Rates of the components. The Pass-Through Rate on the Class BCX Certificates will be subject to adjustment on each Distribution Date. Each pre-tax yield to maturity set forth in the preceding tables was calculated by determining the monthly discount rate which, when applied to the assumed stream of cash flows to be paid on the Interest Only Certificates would cause the discounted present value of such assumed stream of cash flows to equal the assumed purchase price listed in the corresponding table. Accrued interest is included in the assumed purchase price of each class of Interest Only Certificates and is used in computing the corporate bond equivalent yields shown. These yields do not take into account the different interest rates at which investors may be able to reinvest funds received by them as distributions on the Interest Only Certificates, and thus do not reflect the return on any investment in the interest only Certificates when, as applicable, any reinvestment rates other than the discount rates set forth in the preceding tables are considered. Notwithstanding the assumed prepayment rates reflected in the preceding tables, it is highly unlikely that the Mortgage Loans will be prepaid according to one particular pattern. For this reason and because the timing of cash flows is critical to determining yields, the pre-tax yield to maturity on the Interest Only Certificates is likely to differ from those shown in the tables, even if all of the Mortgage Loans prepay at the indicated constant percentages of CPR over any given time period or over the entire life of the Certificates. There can be no assurance that the Mortgage Loans will prepay at any particular rate or that the yield on the Interest Only Certificates will conform to the yields described herein. Moreover, the various remaining terms to maturity of the Mortgage Loans could produce slower or faster principal distributions than indicated in the preceding tables at the various constant percentages of CPR specified, even if the weighted average remaining term to maturity of the Mortgage Loans is as assumed. Investors are urged to make their investment decisions based on their determinations as to anticipated rates of prepayment under a variety of scenarios. Investors in the Interest Only Certificates should fully consider the risk that an extremely rapid rate of prepayments on the Mortgage Loans could result in the failure of such investors to fully recover their investments. In addition, holders of the class A1X and Class A2X Certificates generally have rights to relatively larger portions of interest payments on Mortgage Loans with higher mortgage interest rates; thus, the yield on the Class A1X and Class A2X Certificates will be materially adversely affected to a greater extent s-49 than on the other Interest Only Certificates if the Mortgage Loans with higher Mortgage Interest Rates prepay faster than the Mortgage Loans with lower Mortgage Rates. FOR ADDITIONAL CONSIDERATIONS RELATING TO THE YIELD ON THE CERTIFICATES, SEE "YIELD CONSIDERATIONS" IN THE PROSPECTUS. CLASS C, CLASS BCX, CLASS D AND CLASS E YIELD CONSIDERATIONS If the Class Balances of the Other Certificates are reduced to zero, the yield to maturity on the Class E Certificates will become extremely sensitive to losses on the Mortgage Loans (and the timing thereof), because the entire amount of such losses will be allocated to the Class E Certificates. The aggregate initial Class Balance of the Other Certificates is equal to approximately ____% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date. If the Class Balances of the Other Certificates and the Class E Certificates are reduced to zero, the yield to maturity on the Class D Certificates will become extremely sensitive to losses on the Mortgage Loans (and the timing thereof), because the entire amount of such losses will be allocated to the Class D Certificates. The aggregate initial Class Balance of the Class E and the Other Certificates is equal to approximately ____% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date. If the Class Balances of the Other Certificates, the Class E and the Class D Certificates are reduced to zero, the yield to maturity on the Class C and Class BCX Certificates will become extremely sensitive to losses on the Mortgage Loans (and the timing thereof), because the entire amount of such losses will be allocated to the Class C and Class BCX Certificates. The aggregate initial Class Balance of the Class D, Class E and Other Certificates is equal to approximately ____% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date. The Special Servicer will be entitled to receive, with respect to each Specially Serviced Mortgage Loan compensation in the form of a percentage of collections and a percentage of the outstanding principal balance of any Specially Serviced Mortgage Loan which is returned to a performing status prior to the right of Certificateholders to receive distributions on the Certificates. Such compensation will result in shortfalls which will be allocated to the Certificates in the manner provided for Realized Losses. Consequently it is possible that shortfalls will be allocated to the Offered Certificates with respect to any Specially Serviced Mortgage Loan notwithstanding the fact that such Mortgage Loan is returned to a performing status. See "Servicing -- Servicing and Other Compensation and Payment of Expenses" herein. The information set forth herein concerning the services has been provided by the related Servicer. Neither the Depositor nor any other person makes any representation or warranty as to the accuracy or completeness of such information. Investors are urged to make their investment decisions based on their determinations as to anticipated rates of principal payments and Realized Losses. Investors in the Class C and Class BCX Certificates and particularly the Class D and Class E Certificates should fully consider to risk that Realized Losses on the Mortgage Loans could result in a failure of such investors to fully recover their investments. See "Yield Considerations" in the Prospectus. SERVICING SERVICERS ___________________________________________ will serve as Master Servicer and Special Servicer for all the Mortgage Loans and as Primary Servicer for all the Mortgage Loans originated by ________________________. _______________________ is a wholly owned subsidiary of ______________________________. The principal offices of ___________________ are located at _________________________________________. The servicing of all performing loans will be performed by the ___________________________, a division of ____________________ located in ___________________________. As of ________________________, _________________________ portfolio consisted of approximately ___________ loans with an aggregate principal balance of approximately $________________. S-50 ____________________. _________________________ ("_________"), a __________ corporation, will serve as Primary Servicer for all the Mortgage Loans originated by ________________________. __________, an indirect wholly-owned subsidiary of ____________________, is engaged in the asset management, servicing, liquidation, collection, asset valuation and consulting and related activities with nonaffiliated companies and governmental entities, including the Federal Deposit Insurance Corporation and Resolution Trust Corporation. _____________'s operating office is located in ______________, __________, and _________ has managed and serviced real estate assets in all 50 states, the District of Columbia and Puerto Rico. As of __________________, 199__, ____________ was responsible for managing and servicing of approximately _______ assets, consisting of loans, foreclosed real estate assets and other assets with a total principal balance in excess of $____billion of which $_____billion is administered under special servicing contracts. - -------- has provided servicing in some capacity for ____ portfolios securing commercial mortgage backed securities. ___________________________. _______________________, a __________ corporation ("_________"), will act as Primary Servicer with respect to the Mortgage Loans originated by ________________. As of ___________, 199__, ___________ had a net worth of approximately $_____ million and a total commercial and multifamily mortgage loan servicing portfolio (including mortgage loans serviced for its own account and for others) of approximately $___________ billion. ____________________'s principal executive offices are located at _________________________________________________________________, and its telephone number is (___) ___-____. ________________ conducts operations from its headquarters in ____________ and from offices located in _____________, ______________, _____________, ___________, ____________, ____________ and _________________. The information set forth herein concerning the Servicers has been provided by the related Servicer. Neither the Depositor nor any other person makes any representation or warranty as to the accuracy or completeness of such information. RESPONSIBILITIES OF MASTER SERVICER AND PRIMARY SERVICER Under the Servicing Agreements, the Master Servicer and each Primary Servicer are required to service and administer the Mortgage Loans solely on behalf of and in the best interests of and for the benefit of the Certificateholders, in accordance with the terms of the Servicing Agreement and the Mortgage Loans and to the extent consistent with such terms, with the higher of (a) the standard of care, skill, prudence and diligence with which the Master Servicer and each Primary Servicer, respectively, service and administer mortgage loans that are held for other portfolios that are similar to the Mortgage Loans and (b) the standard of care, skill, prudence and diligence with which the Master Servicer and each Servicer, respectively, service and administer mortgage loans for their own portfolio and are similar to the Mortgage Loans, in either case, giving due consideration to customary and usual standards of practice of prudent institutional multifamily and commercial mortgage lenders, loan servicers and asset managers. RESPONSIBILITIES OF SPECIAL SERVICER The servicing responsibility on a particular Mortgage Loan will be transferred to the Special Servicer upon the occurrence of certain servicing transfer events (each, a "SERVICING TRANSFER EVENT"), including the following: (i) the Mortgage Loan becomes a "DEFAULTED MORTGAGE LOAN" because it is more than 60 days delinquent in whole or in part in respect of any monthly payment or is delinquent in whole or in part in respect of the related Balloon Payment; (ii) the related Mortgagor has entered into or consented to bankruptcy, appointment of a receiver or conservator or a similar insolvency or similar proceeding, or the Mortgagor has become the subject of a decree or order for such a proceeding which shall have remained in force undischarged or unstayed for a period of 60 days; (iii) the Master Servicer or the Primary Servicer shall have received notice of the foreclosure or proposed foreclosure of any other lien on the Mortgaged Property; (iv) in the judgment of the Master Servicer or the Primary Servicer, a payment default has occurred and is not likely to be cured by the related Mortgagor within 60 days; (v) the related Mortgagor admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations; (vi) any other material default has in the Master Servicer's or the Primary Servicer's judgment occurred which is not reasonably susceptible to cure within the time periods and on the conditions specified in the related S-51 mortgage; (vii) the related Mortgaged Property becomes an REO Property; (viii) if for any reason, the Primary Servicer cannot enter into an assumption agreement upon the transfer by the related Mortgagor of the mortgage; or (ix) an event has occurred which has materially and adversely affected the value of the related Mortgaged Property in the reasonable judgment of the Master Servicer or the Primary Servicer. A Mortgage Loan serviced by the Special Servicer is referred to herein as a "SPECIALLY SERVICED MORTGAGE LOAN". The Special Servicer will collect certain payments on such Specially Serviced Mortgage Loans and make certain remittances to, and prepare certain reports for the Master Servicer with respect to such Mortgage Loans. The Master Servicer shall have no responsibility for the performance by the Special Servicer of its duties under the Pooling and Servicing Agreement provided that the Master Servicer continues to perform certain servicing functions on such Specially Serviced Mortgage Loans and, based on the information provided to it by the Special Servicer, prepares certain reports to the Trustee with respect to such Specially Serviced Mortgage Loans. To the extent that any Mortgage Loan, in accordance with its original terms or as modified in accordance with the Pooling and Servicing Agreement, becomes a performing Mortgage Loan for a least three consecutive months, the Special Servicer will return servicing of such Mortgage Loan to the Primary Servicer. Under the Pooling and Servicing Agreement the Special Servicer is required to service, administer and dispose of Specially Serviced Mortgage Loans solely in the best interests of and for the benefit of the Certificateholders, in accordance with the Pooling and Servicing Agreement and the Mortgage Loans and to the extent consistent with such terms, with the higher of (a) the standard of care, skill, prudence and diligence with which the Special Servicer services, administers and disposes of, distressed mortgage loans and related real property that are held for other portfolios that are similar to the Mortgage Loans, Mortgaged Property and REO Property and (b) the standard of care, skill, prudence and diligence with which the Special Servicer services, administers and disposes of distressed mortgage loans and related real property for its own portfolio and are similar to the Mortgage Loans, Mortgage Property and REO Property, giving due consideration to customary and usual standards of practice of prudent institutional multifamily and commercial mortgage lenders, loan servicers and asset managers, so as to maximize the net present value of recoveries on the Mortgage Loans. The Special Servicer shall have full power and authority to do any and all things in connection with servicing and administering a Mortgage Loan that it may deem in its best judgment necessary or advisable, including, without limitation, to execute and deliver on behalf of the Trust Fund any and all instruments of satisfaction or cancellation or of partial release or full release or discharge and all other comparable instruments, to reduce the related Mortgage Interest Rate, and to defer or forgive payment of interest and/or principal with respect to any Specially Serviced Mortgage Loan or any Mortgaged Property. The Special Servicer may not permit a modification of any Mortgage Loan to extend the scheduled maturity date of any Specially Serviced Mortgage Loan more than three years beyond the scheduled maturity date thereof as of the Cut-off Date without the consent of the Extension Advisor. See "--Extension Advisor" below. Notwithstanding the forgoing, the Special Servicer may not permit any such modification with respect to a Balloon Mortgage Loan if it results in the extension of such maturity date beyond the amortization term of such Balloon Mortgage Loan absent the related Balloon Payment. The Special Servicer will prepare a report (an "ASSET STRATEGY REPORT") for each Mortgage Loan which becomes a Specially Serviced Mortgage Loan not later than thirty (30) days after the servicing of such Mortgage Loan is transferred to the Special Servicer. Each Asset Strategy Report will be delivered to each holder of a Class F, Class G and Class NR Certificate upon request. The holders of the fewest number of classes of Certificates representing the most subordinate interests in the Trust Fund that equals at least a 2% interest therein (the "MONITORING CERTIFICATEHOLDERS") will designate one Monitoring Certificateholder pursuant to the Pooling and Servicing Agreement (the "DIRECTING CERTIFICATEHOLDER"). Each Asset Strategy Report will be delivered to the Directing Certificateholder. The Directing Certificateholder may object to any Asset Strategy Report within 10 business days of receipt. If the Directing Certificateholder does not disapprove an Asset Strategy Report within 10 business days, the Special Servicer shall implement the recommended action as outlined in such Asset Strategy Report. If the Directing Certificateholder disapproves such Asset Strategy Report and the Special Servicer has not made the affirmative determination described below, the Special Servicer will revise such Asset Strategy Report as soon as practicable. The Special Servicer will revise such Asset Strategy Report until the Directing Certificateholder fails to disapprove such revised Asset Strategy Report; provided, however, that the Special Servicer shall implement the recommended action as outlined in such Asset Strategy Report if it makes an affirmative determination that such objection is not in the best interest of all Certificateholders. In connection with making such affirmative determination, the Special Servicer may request a vote by all the Certificateholders. Any Certificateholder may request and obtain a copy of any Asset Strategy Report subject to delivery of a certificate acknowledging certain possible limitations with respect to the use of such report imposed by U.S. securities laws. S-52 EXTENSION ADVISOR The Extension Advisor will be responsible for approving any proposed Mortgage Loan modification that extends the maturity date of a Mortgage Loan by more than three (3) years beyond the scheduled maturity date of such loan as of the Cut-off Date. The initial Extension Advisor, acting on behalf of the holders of the Offered Certificates, shall only grant such approvals if it shall have determined that the decision of the Special Servicer to so modify the Mortgage Loan is consistent with the Special Servicer standard set forth in the Pooling and Servicing Agreement. Any subsequent Extension Advisor may grant such approvals if it shall have determined that the decision of the Special Servicer to so modify the Mortgage Loan is in the best interest of the Holders of the Offered Certificates. The initial Extension Advisor will be _______________. The responsibility of _____________ as Extension Advisor shall be carried out by the Real Estate Division of the Commercial Banking Services Area of such bank. At any time, the holders of a majority of the outstanding aggregate Certificate Principal Balance of the Offered Certificates may remove the Extension Advisor. In such event, the Trustee will so inform such Certificateholders, and a majority of Certificate Principal Balance of the holders of such Certificates shall have the right to appoint a replacement Extension Advisor. SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES The principal compensation to be paid to the Master Servicer and each respective Primary Servicer in respect of their servicing activities will be the Servicing Fee. The Servicing Fee will be payable monthly and will accrue at the applicable Servicing Fee Rate and will be computed on the basis of the same principal amount and for the same period respecting which any related interest payment on such Mortgage Loan is computed. The Servicing Fee Rate for any Mortgage Loan will be the sum of the fee payable to the Master Servicer and the fee payable to the Primary Servicer as described below. The fee payable to the Master Servicer with respect to the Mortgage Loans will equal _____% per annum. The fee payable to __________________ and _____________________ as Primary Servicer with respect to the Mortgage Loans will equal _______% per annum. The fee payable to __________ as Primary Servicer will equal ______________% per annum. The principal compensation to be paid to the Special Servicer in respect of its special servicing activities will be the Special Servicing Fee. The Special Servicing Fee will be payable monthly only from amounts received in respect of each Specially Serviced Mortgage Loan. The Special Servicing Fee will equal 1.00% of all amounts collected with respect to any Specially Serviced Mortgage Loans and any Mortgage Loan which became a Specially Serviced Mortgage Loan and was subsequently returned to a performing status. CONFLICTS OF INTEREST The Special Servicer or its affiliates own and are in the business of acquiring assets similar to the Mortgage Loans held by the Trust Fund. To the extent that any mortgage loans owned and/or serviced by the Special Servicer or its affiliates are similar to the Mortgage Loans held by the Trust Fund, the mortgaged properties related to such mortgage loans may, depending upon certain circumstances such as the location of the mortgaged property, compete with the Mortgaged Properties related to the Mortgage Loans held by the Trust Fund for tenants, purchasers, financing and similar resources. DESCRIPTION OF THE POOLING AND SERVICING AGREEMENT GENERAL The Certificates will be issued pursuant to a Pooling and Servicing Agreement to be dated as of ___________, 199__ (the "POOLING AND SERVICING AGREEMENT"), by and among the Depositor, the Master Servicer, the Special Servicer and the Trustee. Following are summaries of certain provisions of the Pooling and Servicing Agreement. The summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, the provisions of the Pooling and Servicing Agreement. The Trustee will provide to a prospective or actual Certificateholder without charge, upon written request, a copy (without exhibits) of the Pooling and Servicing Agreement. Requests S-53 should be addressed to ________________________________, _____________________, Attention: Corporate Trust Department. ASSIGNMENT OF THE MORTGAGE LOANS On or prior to the Delivery Date, ICCC will assign or cause to be assigned the Mortgage Loans, without recourse, to the Trustee for the benefit of the Certificateholders. On or prior to the Delivery Date, the Depositor will, as to each Mortgage Loan, deliver to the Trustee (or the Custodian), among other things, the following documents (collectively, as to such Mortgage Loan, the "MORTGAGE LOAN FILE"): (i) the original Mortgage, and any intervening assignments thereof, in each case with evidence of recording thereon or in case such documents have not been returned by the applicable recording office, certified copies thereof; (ii) the original or, if accompanied by a "lost note" affidavit, a copy of the Mortgage Note, endorsed by ICCC, without recourse, in blank or to the order of Trustee; (iii) an assignment of the Mortgage, executed by ICCC, in blank or to the order of the Trustee, in recordable form; (iv) originals or certified copies of any related assignment of leases, rents and profits and any related security agreement (if, in either case, such item is a document separate from the Mortgage) and any intervening assignments of each such document or instrument; (v) assignments of any related assignment of leases, rents and profits and any related security agreement (if, in either case, such item is a document separate from the Mortgage), executed by ICCC, in blank or to the order of the Trustee; (vi) originals or certified copies of all assumption, modification and substitution agreements in those instances where the terms or provisions of the Mortgage or Mortgage Note have been modified or the Mortgage or Mortgage Note has been assumed; and (vii) the originals or certificates of a lender's title insurance policy issued on the date of the origination of such Mortgage Loan or, with respect to each Mortgage Loan not covered by a lender's title insurance policy, an attorney's opinion of title given by an attorney licensed to practice law in the jurisdiction where the Mortgaged Property is located; (viii) originals or copies of any UCC financing statements; (ix) originals or copies of any guaranties related to such Mortgage Loan; (x) originals or copies of insurance policies related to the Mortgaged Property; (xi) originals or certified copies of any environmental liabilities agreement; (xii) originals or copies of any escrow agreements; (xiii) original or certified copies of any prior assignments of mortgage if the Originator is not the originator of record; (xiv) any collateral assignments of property management agreements and other servicing agreements; (xv) the documents specified in the Underwriting Guidelines for the due diligence investigation to be performed by or on behalf of the Originator pursuant to the Mortgage Loan Purchase Agreement; (xvi) any appraisals of the Mortgaged Property; (xvii) a physical assessment report of the Mortgaged Property; (xviii) an environmental site assessment of the Mortgaged Property; (xix) originals or certified copies of any lease subordination agreements and tenant estoppels; and (xx) any opinions of borrower's counsel. The Pooling and Servicing Agreement will require the Depositor to cause each assignment of the Mortgage described in clause (iv) above to be submitted for recording in the real property records of the jurisdiction in which the related Mortgaged Property is located. Any such assignment delivered in blank will be completed to the order of the Trustee prior to recording. The Pooling and Servicing Agreement will also require the Depositor to cause the endorsements on the Mortgage Notes delivered in blank to be completed to the order of the Trustee. TRUSTEE ____________________ shall serve as Trustee under the Pooling and Servicing Agreement pursuant to which the Certificates are being issued. Except in circumstances such as those involving defaults (when it might request assistance from other departments in the bank), its responsibilities as trustee are carried out by its Corporate Trust Department. Its principal corporate trust office is located at _________________________________________. COLLECTION ACCOUNTS AND CERTIFICATE ACCOUNT The Primary Servicer is required to deposit all amounts received with respect to the Mortgage Loans, net of certain amounts retained by the Primary Servicer as additional servicing compensation, into a separate Collection Account (the "PRIMARY COLLECTION ACCOUNT") maintained by the Primary Servicer for the Trust Fund. On the third business day preceding each Distribution Date, the Primary Servicer shall remit all amounts in the Primary Collection Account to the Master Servicer for deposit into a separate Collection Account (the "MASTER COLLECTION ACCOUNT") maintained by the Master Servicer for the Trust Fund. The Master Servicer is required to deposit on the business day preceding each Distribution Date all amounts received with respect to the Mortgage Loans into a separate account (the "CERTIFICATE ACCOUNT") maintained with the Trustee. Interest or other income earned on funds in the Primary Collection Account or the Master Collection Account will be paid to the Servicer maintaining such account as additional servicing S-54 compensation. See "Description of the Trust Funds -- Mortgage Loans" and "Description of the Agreements --Accounts -- Distribution Account" and "Description of the Agreements -- Accounts -- Other Collection Accounts" in the Prospectus. REPORTS TO CERTIFICATEHOLDERS On each Distribution Date the Trustee shall furnish to each Certificateholder, to the Depositor and to each Rating Agency a statement setting forth certain information with respect to the Mortgage Loans and the Certificates required pursuant to the Pooling and Servicing Agreement and in the form of Annex B hereto. In addition, within a reasonable period of time after each calendar year, the Trustee shall furnish to each person who at any time during such calendar year was the holder of a Certificate a statement containing certain information with respect to the Certificates required pursuant to the Pooling and Servicing Agreement, aggregated for such calendar year or portion thereof during which such person was a Certificateholder. Unless and until Definitive Certificates are issued, such statements or reports will be furnished only to Cede & Co., as nominee for DTC; provided, however, that the Trustee shall furnish a copy of any such statement or report to any Beneficial Owner which requests such copy and certifies to the Trustee that it is the Beneficial Owner of a Certificate. The Trustee shall furnish a copy of any such statement or report to any person who requests it for a nominal charge. Any person may call the Master Servicer at ______________ in order to inquire as to how to obtain such statement or report. Such statement or report may be available to Beneficial Owners upon request to DTC or their respective Participant or Indirect Participants. Any Asset Strategy Report shall be delivered by the Trustee upon request to any Beneficial Owner of an Offered Certificate subject to the second preceding sentence and the receipt by the Trustee of a certificate acknowledging certain limitations with respect to the use of such statement or report. See "Description of the Certificates -- Reports to Certificateholders" in the Prospectus. The Directing Certificateholder shall receive all reports prepared or received by the Master Servicer or the Special Servicer. In addition, each other Certificateholder may obtain all such reports at its expense as described in the Pooling and Servicing Agreement. VOTING RIGHTS At all times during the term of this Agreement, _____% of all Voting Rights shall be allocated among the classes of Certificates (other than the Interest Only Certificates) in proportion to the respective Class Balances, _____% of all Voting Rights shall be allocated to each class of Interest Only Certificates and _______% of all Voting Rights shall be allocated to each class of Residual Certificates. Voting Rights allocated to a class of Certificates shall be allocated among the holders of such class in proportion to the Percentage Interests evidenced by their respective Certificates. As described under "Description of the Certificates -- Book-Entry Registration and Definitive Certificates" in the Prospectus, unless and until Definitive Certificates are issued, except as otherwise expressly provided herein, Certificate Owners may only exercise their rights as owners of Certificates indirectly through DTC or their respective Participant or Indirect Participant. TERMINATION The obligations created by the Pooling and Servicing Agreement will terminate following the earliest of (i) the final payment or other liquidation of the last Mortgage Loan or REO Property subject thereto, and (ii) the purchase of all of the assets of the Trust Fund by any of the Master Servicer, the Special Servicer, any holder of a Class R-I Certificate, the holders of an aggregate Percentage Interest in excess of 50% of the Most Subordinate Class of Certificates and (to the extent all of the remaining Mortgage Loans are being serviced thereby as Primary Servicer) any Primary Servicer. The "MOST SUBORDINATE CLASS OF CERTIFICATES" at the time of determination shall be the class of Certificates to which Realized Losses would be allocated at such time as described under "Description of the Certificates -- Subordination" herein. Written notice of termination of the Pooling and Servicing Agreement will be given to each Certificateholder, and the final distribution will be made only upon surrender and cancellation of the Certificates at the office of the Certificate Registrar specified in such notice of termination. Any such purchase of all the Mortgage Loans and other assets in the Trust Fund is required to be made at a price equal to the greater of (1) the aggregate fair market value of all the Mortgage Loans and REO Properties then included in the Trust Fund, determined pursuant to the Pooling and Servicing Agreement, and (2) the aggregate Class S-55 Balance of all the Certificates plus accrued and unpaid interest thereon. Such purchase will effect early retirement of the then outstanding Certificates, but the right to effect such termination is subject to the requirement that the aggregate Stated Principal Balance of the Mortgage Loans then in the Trust Fund is less than ____% of the aggregate principal balance of the Mortgage Loans as of the Cut-off Date. USE OF PROCEEDS The net proceeds from the sale of the Certificates will be used by the Depositor to pay the purchase price of the Mortgage Loans. FEDERAL INCOME TAX CONSEQUENCES The following summary of the anticipated material federal income tax consequences of the purchase, ownership and disposition of Offered Certificates is based on the advice of Andrews & Kurth L.L.P., counsel to the Depositor. This summary is based on laws, regulations, including the REMIC regulations promulgated by the Treasury Department (the "REMIC REGULATIONS"), rulings and decisions now in effect or (with respect to regulations) proposed, all of which are subject to change either prospectively or retroactively. This summary does not address the federal income tax consequences of an investment in Offered Certificates applicable to all categories of investors, some of which (for example, banks and insurance companies) may be subject to special rules. Prospective investors should consult their tax advisors regarding the federal, state, local and any other tax consequences to them of the purchase, ownership and disposition of Offered Certificates. Three separate REMIC elections will be made with respect to the Trust Fund for federal income tax purposes. Upon the issuance of the Certificates, Andrews & Kurth L.L.P., counsel to the Depositor, is of the opinion that, assuming compliance with all provisions of the Pooling and Servicing Agreement, for federal income tax purposes, the REMIC I, REMIC II and REMIC III (each as defined in the Pooling and Servicing Agreement) will qualify as a REMIC under the Code. For federal income tax purposes, the Class R-I Certificates will be the sole class of "residual interests" in REMIC I, the Class R-II Certificates will be the sole class of "residual interests" in REMIC II, the Offered Certificates (or, in the case of the Class BCX Certificates, each component thereof) and the Class F, Class G and Class NR Certificates will be "regular interests" of REMIC III and will be treated as debt instruments of the REMIC III, and the Class R-III Certificates will be the sole class of "residual interests" in REMIC III. See "Federal Income Tax Consequences -- REMICs" in the Prospectus. The Interest Only Certificates will, and the other classes of Offered Certificates may, be treated as having been issued with original issue discount for federal income tax reporting purposes. For purposes of computing the rate of accrual of original issue discount, market discount and premium, if any, for federal income tax purposes it will be assumed that there are no prepayments on the Mortgage Loan. No representation is made that the Mortgage Loans will not prepay at another rate. See "Federal Income Tax Consequences -- REMICs -- Taxation of Owners of REMIC Regular Certificates" and "--Original Issue Discount and Premium" in the Prospectus. Prepayment Premiums allocated to the Certificates will be taxable to the holders of such Certificates on the date the amount of such premiums becomes fixed. The Offered Certificates may be treated for federal income tax purposes as having been issued at a premium. Whether any holder of such a class of Certificates will be treated as holding a certificate with amortizable bond premium will depend on such Certificateholder's purchase price and the distributions remaining to be made on such Certificate at the time of its acquisition by such Certificateholder. Holders of such class of Certificates should consult their own tax advisors regarding the possibility of making an election to amortize such premium. See "Federal Income Tax Consequences -- REMICs -- Taxation of Owners of REMIC Regular Certificates" and "--Premium" in the Prospectus. S-56 The Offered Certificates will be treated as "qualifying real property loans" within the meaning of Section 593(d) of the Code and "real estate assets" within the meaning of Section 856(c)(6)(B) of the Code generally in the same proportion that the assets of the REMIC underlying such Certificates would be so treated. In addition, interest (including original issue discount) on the Offered Certificates will be interest described in Section 856(c)(3)(B) of the Code to the extent that such Offered Certificates are treated as "real estate assets" under Section 856(c)(6)(B) of the Code. Moreover, the Offered Certificates will be "obligation[s]...which... [are] principally secured by an interest in real property" within the meaning of Section 860G(a)(3)(A) of the Code. The Offered Certificates will not be considered to represent an interest in "loans...secured by an interest in real property" within the meaning of Section 7701 (a)(19)(C)(v) of the Code except in the proportion that the assets of the Trust Fund are represented by Mortgage Loans secured by multifamily apartment buildings. See "Federal Income Tax Consequences -- REMICs - --Characterization of Investments in REMIC Certificates" in the Prospectus. For further information regarding the federal income tax consequences of investing in the Certificates, see "Federal Income Tax Consequences" in the Prospectus. STATE TAX CONSIDERATIONS In addition to the federal income tax consequences described in "Federal Income Tax Consequences," potential investors should consider the state income tax consequences of the acquisition, ownership, and disposition of the Offered Certificates. State income tax law may differ substantially from the corresponding federal law, and this discussion does not purport to describe any aspect of the income tax laws of any state. Therefore, potential investors should consult their own tax advisors with respect to the various tax consequences of investments in the Offered Certificates. ERISA CONSIDERATIONS A fiduciary of any employee benefit plan or other retirement plan or arrangement, including individual retirement accounts and annuities, Keogh plans and collective investment funds and separate accounts in which such plans, accounts or arrangements are invested, and any entity whose underlying assets include assets of such a plan by reason of any such plan's investment in the entity that is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code (each, a "PLAN") should carefully review with its legal advisors whether the purchase or holding of any Class of Offered Certificates could give rise to a transaction that is prohibited or is not otherwise permitted either under ERISA or Section 4975 of the Code. The U.S. Department of Labor issued an individual exemption (the "EXEMPTION") to the Underwriter, which generally exempts from the application of certain prohibited transaction provisions of Section 406 of ERISA, and the excise taxes imposed on such prohibited transactions pursuant to Sections 4975(a) and (b) of the Code and Section 502(i) of ERISA, certain transactions, among others, relating to the servicing and operation of mortgage pools and the purchase, sale and holding of mortgage pass-through certificates underwritten by an Underwriter (as hereinafter defined), provided that certain conditions set forth in the Exemption are satisfied. For purposes of this Section "ERISA Considerations", the term "UNDERWRITER" shall include (a) ________________________, (b) any person directly or indirectly, through one or more intermediaries, controlling, controlled by or under common control with ______________________, and (c) any member of the underwriting syndicate or selling group of which a person described in (a) or (b) is a manager or co-manager with respect to the Class A1, Class A1X, Class A2 and Class A2X Certificates. The Exemption sets forth six general conditions which must be satisfied for a transaction involving the purchase, sale and holding of such Classes of Offered Certificates to be eligible for exemptive relief thereunder. First, the acquisition of such Classes of Offered Certificates by a Plan, must be on terms (including the price) that are at least as favorable to the Plan as they would be in an arm's-length transaction with an unrelated party. Second, the rights and interests evidenced by such Classes of Offered Certificates must not be subordinate to the rights and interests evidenced by the other certificates of the same trust. Third, such Classes of Offered Certificates at the time of acquisition by the Plan must be rated in one of the three highest generic rating categories by Standard & Poor's Corporation, Moody's Investors Service, Inc., Duff & Phelps Credit Rating Co. or Fitch Investors Service, Inc. Fourth, the Trustee cannot be S-57 an affiliate of any member of the "Restricted Group," which consists of the Underwriter, the Depositor, the Master Servicer, the Special Servicer, each Primary Servicer and any Mortgagor with respect to Mortgage Loans constituting more than 5% of the aggregate unamortized principal balance of the Mortgage Loans as of the date of initial issuance of such Classes of Offered Certificates. Fifth, the sum of all payments made to and retained by the Underwriter must represent not more than reasonable compensation for underwriting such Classes of Offered Certificates; the sum of all payments made to and retained by the Depositor pursuant to the assignment of the Mortgage Loans to the Trust Fund must represent not more than the fair market value of such obligations; and the sum of all payments made to and retained by the Master Servicer, the Special Servicer and any Primary Servicer must represent not more than reasonable compensation for such person's services under the Agreements and reimbursement of such person's reasonable expenses in connection therewith. Sixth, the investing Plan must be an accredited investor as defined in Rule 501 (a)(1) of Regulation D of the Securities and Exchange Commission under the Securities Act of 1933, as amended. Because the Class A1, Class A1X, Class A2 and Class A2X Certificates are not subordinate to any other class of Certificates, the second general condition set forth above is satisfied with respect to such Certificates. It is a condition of the issuance of such Classes of Certificates that they be rated "______" by ________________ and either "----" or "____" by ________________. A fiduciary of a Plan contemplating purchasing any such Class of Certificates in the secondary market must make its own determination that at the time of such acquisition, any such Class of Certificates continues to satisfy the third general condition set forth above. The Depositor expects that the fourth general condition set forth above will be satisfied with respect to each of such Classes of Certificates. A fiduciary of a Plan contemplating purchasing any such Class of Certificate must make its own determination that the first, third, fifth and sixth general conditions set forth above will be satisfied with respect to any such Class of Certificate. The Class B, Class C, Class BCX, Class D and Class E do not satisfy the second condition described above because they are subordinated to the Class A1, Class A1X, Class A2 and Class A2X Certificates, and furthermore the Class D and Class E Certificates are not expected to satisfy the third condition described above. Before purchasing any Class of Certificate, a fiduciary of a Plan should itself confirm (a) that such Certificates constitute "certificates" for purposes of the Exemption and (b) that the specific and general conditions of the Exemption and the other requirements set forth in the Exemption would be satisfied. In addition to making its own determination as to the availability of the exemptive relief provided in the Exemption, the Plan fiduciary should consider the availability of any other prohibited transaction exemptions. Purchasers using insurance company general account funds to effect such purchase should consider the availability of Prohibited Transaction Class Exemption 95-60 (60 Fed. Reg. 35925, July 12, 1995) issued by the U.S. Department of Labor. Any Plan fiduciary considering whether to purchase any Class of Certificate on behalf of a Plan should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code to such investment. See "ERISA Considerations" in the Prospectus. LEGAL INVESTMENT The Class ___, Class ___, Class ___, Class ___ and Class ___ Certificates will be "mortgage related securities" within the meaning of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA") for so long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization. The Class ___, Class ___ and Class ___ Certificates will not be "mortgage related securities" within the meaning of SMMEA. In addition, institutions whose investment activities are subject to review by certain regulatory authorities may be or may become subject to restrictions, which may be retroactively imposed by such regulatory authorities, on the investment by such institutions in certain forms of mortgage-backed securities. Furthermore, certain states have enacted legislation overriding the legal investment provisions of SMMEA. The Depositor makes no representations as to the proper characterization of the Offered Certificates for legal investment or other purposes, or as to the ability of particular investors to purchase the Offered Certificates under S-58 applicable legal investment restrictions. These uncertainties may adversely affect the liquidity of the Offered Certificates. Accordingly, all institutions whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities should consult with their own legal advisors in determining whether and to what extent the Offered Certificates constitute a legal investment or are subject to investment, capital or other restrictions. See "Legal Investment" in the Prospectus. METHOD OF DISTRIBUTION Subject to the terms and conditions set forth in an Underwriting Agreement, dated _____________, 199___ (the "UNDERWRITING AGREEMENT"), the Underwriter has agreed to purchase and the Depositor has agreed to sell to the Underwriter the Offered Certificates. It is expected that delivery of the Offered Certificates will be made only in book-entry form through the Same Day Funds Settlement System of DTC on or about ______________, 199___, against payment therefor in immediately available funds. In the Underwriting Agreement, the Underwriter has agreed, subject to the terms and conditions set forth therein, to purchase all of the Offered Certificates if any are purchased. In the event of default by the Underwriter, the Underwriting Agreement provides that, in certain circumstances, the underwriting may be terminated. The Underwriting Agreement provides that the obligation of the Underwriter to pay for and accept delivery of its Certificates is subject to, among other things, the receipt of certain legal opinions and to the conditions, among others, that no stop order suspending the effectiveness of the Depositor's Registration Statement shall be in effect, and that no proceedings for such purpose shall be pending before or threatened by the Securities and Exchange Commission. The distribution of the Offered Certificates by the Underwriter may be effected from time to time in one or more negotiated transactions, or otherwise, at varying prices to be determined at the time of sale. Proceeds to the Depositor from the sale of the Offered Certificates, before deducting expenses payable by the Depositor, will be approximately ____________% of the aggregate principal balance of the Offered Certificates as of the Cut-off Date, plus accrued interest from the Cut-off Date. The Underwriter may effect such transactions by selling its Certificates to or through dealers, and such dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the Underwriter for whom they act as agent. In connection with the sale of the Offered Certificates, the Underwriter may be deemed to have received compensation from the Depositor in the form of underwriting compensation. The Underwriter and any dealers that participate with the Underwriter in the distribution of the Offered Certificates may be deemed to be underwriters and any profit on the resale of the Offered Certificates positioned by them may be deemed to be underwriting discounts and commissions under the Securities Act of 1933, as amended. The Underwriting Agreement provides that the Depositor will indemnify the Underwriter, and that under limited circumstances the Underwriter will indemnify the Depositor, against certain civil liabilities under the Securities Act of 1933, as amended, or contribute to payments to be made in respect thereof. There can be no assurance that a secondary market for the Offered Certificates will develop or, if it does develop, that it will continue. The primary source of ongoing information available to investors concerning the Offered Certificates will be the reports discussed herein under "Description of the Pooling and Servicing Agreement --Reports to Certificateholders." Except as described herein under "Description of the Pooling and Servicing Agreement - --Reports to Certificateholders", there can be no assurance that any additional information regarding the Offered Certificates will be available through any other source. In addition, the Depositor is not aware of any source through which price information about the Offered Certificates will be generally available on an ongoing basis. The limited nature of such information regarding the Offered Certificates may adversely affect the liquidity of the Offered Certificates, even if a secondary market for the Offered Certificates becomes available. S-59 LEGAL MATTERS Certain legal matters will be passed upon for the Depositor by Andrews & Kurth L.L.P., Dallas, Texas; and certain legal matters will be passed upon for the Underwriter by ____________________________________________. RATING It is a condition of issuance of the Class A1 and Class A2 Certificates be rated "____" by ________________ ("________________ ") and ________________ ("________________ "). It is a condition of the issuance of the Class A1X and Class A2X Certificates that they be rated "______" by ________________ and "_____" by ________________. It is a condition of the issuance of the Class B Certificates that they be rated not lower than "---" by ________________ and ________________. It is a condition of the issuance of the Class C Certificates that they be rated not lower than "__" by ________________ and "___" by ________________. It is a condition to the issuance of the Class BCX Certificates that they be rated not lower than "___" by ________________. It is a condition of the issuance of the Class D Certificates that they be rated not lower than "___" by ________________ and ________________. It is a condition to the issuance of the Class E Certificates that they be rated not lower than "______" by ________________ and ________________. The ratings on mortgage pass-through certificates address the likelihood of the receipt by holders thereof of payments to which they are entitled including the receipt of all principal payments by the Rated Final Distribution Date. Such ratings take into consideration the credit quality of the mortgage pool, structural and legal aspects associated with the certificates, and the extent to which the payment stream in the mortgage pool is adequate to make payments required under the certificates. Such ratings on the Offered Certificates do not, however, constitute a statement regarding frequency or likelihood of prepayments (whether voluntary or involuntary) of the Mortgage Loans, or the degree to which such prepayments might differ from those originally anticipated, or the likelihood of the collection of Prepayment Premiums, and do not address the possibility that Certificateholders might suffer a lower than anticipated yield. The ratings of the Interest Only Certificates does not address the possibility that the holders of such Certificates may fail to fully recover their initial investments due to a rapid rate of prepayments, defaults or liquidations. See "Risk Factors" herein. There can be no assurance as to whether any rating agency not requested to rate the Offered Certificates will nonetheless issue a rating and, if so, what such rating would be. A rating assigned to the Offered Certificates by a rating agency that has not been requested by the Depositor to do so may be lower than the rating assigned by ________________ or ________________ pursuant to the Depositor's request. The rating of the Offered Certificates should be evaluated independently from similar ratings on other types of securities. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each security rating should be evaluated independently of any other security rating. A security rating does not address the frequency or likelihood of prepayments (whether voluntary or involuntary) of Mortgage Loans, or the corresponding effect on the yield to investors. The ratings do not address the fact that the Pass-Through Rates on the Offered Certificates, to the extent determined based on the Remittance Rates, may be affected by changes therein. S-60 INDEX OF PRINCIPAL DEFINITIONS (CONTINUED) PAGE INDEX OF PRINCIPAL DEFINITIONS PAGE ---- "30/360 basis" ..................................................S-4, S-42 "Adjusted Available Distribution Amount"............................S-4, S-42 "Adjusted Collateral Value"..............................................S-45 "Assignment of Leases and Rents".........................................S-28 "Assignment of Mortgage".................................................S-28 "Available Distribution Amount"..........................................S-41 "Balloon Mortgage Loan"...................................................S-3 "Balloon Payment" ........................................................S-3 "Beneficial Owner"..................................................S-2, S-40 "Borrower" .......................................................S-28 "Cede" .......................................................S-40 "CERCLA" .......................................................S-17 "Certificate Account"....................................................S-55 "Certificates" ...............................................1, S-1, S-58 "Class Balance" .........................................................ii "Code" ........................................................S-9 "Collateral Value Adjustment"............................................S-44 "CON" .......................................................S-26 "Custodian" ........................................................S-1 "Cut-off Date LTV Ratio".................................................S-32 "Cut-off Date" ..........................................................i "Debt Service Coverage Ratio"............................................S-33 "Defaulted Mortgage Loan"................................................S-51 "Definitive Certificate"............................................S-2, S-40 "Delivery Date" ..........................................................i "Depositor" ....................................................ii, S-1 "Determination Date"......................................................S-5 "Distribution Date"..............................................i, S-1, S-41 "DOH" .......................................................S-26 "DSCR" .......................................................S-33 "DTC Registered Certificates".......................................S-2, S-40 "DTC" ...............................................i, S-2, S-40 "Due Date" ........................................................S-3 "ERISA" .................................................S-10, S-57 "ESA" .................................................S-17, S-23 "Exemption" .......................................................S-57 "Facility" .......................................................S-26 "FIRREA" .......................................................S-32 "Form 8-K" .......................................................S-39 "ICCC" ........................................................S-1 "Interest Accrual Amount"................................................S-42 "Interest Distribution Amount"......................................S-4, S-42 "Licenses" .......................................................S-26 "Lock-out Date" .......................................................S-37 "Lock-out Period" .......................................................S-37 "Loss Mortgage Loan".....................................................S-45 "Master Servicer" .........................................................ii "Maturity Date LTV Ratio"................................................S-32 "Monitoring Certificateholders"..........................................S-52 "Monthly Payments"........................................................S-3 PAGE "Mortgage File" .......................................................S-28 "Mortgage Loan File".....................................................S-54 "Mortgage Loan Purchase Agreement".......................................S-20 "Mortgage Loan Schedule".................................................S-29 "Mortgage Loans" ....................................................ii, S-2 "Mortgage Note" .......................................................S-20 "Mortgage Pool" ....................................................ii, S-2 "Mortgaged Properties"....................................................S-2 "Mortgaged Property".....................................................S-20 "Mortgage" .......................................................S-20 "Mortgagor" ........................................................S-3 "Most Subordinate Class of Certificates".................................S-55 "Net Prepayment Premium".................................................S-43 "Offered Certificates"......................................................1 "Operator" .................................................S-17, S-26 "Originators" ...................................................ii, S-20 "Other Certificates"......................................................S-6 "P&I Advances" ..................................................S-6, S-45 "Pass-Through Rate"........................................................ii "Percentage Interest"....................................................S-41 "Permitted Exceptions"...................................................S-23 "Person" .......................................................S-29 "Physical Plant Standards"...............................................S-27 "Plan" .......................................................S-57 "Pooling and Servicing Agreement"...................................S-3, S-53 "Prepayment Interest Excess".............................................S-42 "Prepayment Interest Shortfall"..........................................S-42 "Prepayment Premium"................................................S-3, S-37 "prepayment" .......................................................S-47 "Principal Distribution Amount".....................................S-5, S-43 "Property Protection Expenses"...........................................S-45 "Realized Loss" .......................................................S-45 "Reassignment of Assignment of Leases and Rents".........................S-29 "Record Date" ........................................................S-1 "REMIC Regulations"......................................................S-56 "REMIC" ...................................................iii, S-9 "Remittance Rate" .......................................................S-41 "REO Account" .......................................................S-39 "REO Property" .......................................................S-39 "Rules" .......................................................S-40 "Section 42 Properties"..................................................S-15 "Servicing Transfer Event"...............................................S-51 "SMMEA" .................................................S-11, S-58 "Special Servicer".........................................................ii "Specially Serviced Mortgage Loan"..................................S-9, S-52 "Stated Principal Balance"...............................................S-45 "Third-Party Payors' Programs"...........................................S-27 "Trust Fund" .........................................................ii "Underwriter" ....................................................i, S-57 "Underwriting Agreement".................................................S-59 S-61 ANNEX A CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS [Annex A to follow this page] A-1 ANNEX B FORM OF MONTHLY REPORT [Annex B to follow this page] B-1 PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 13, 1998 ICIFC SECURED ASSETS CORP. DEPOSITOR PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES) The pass-through certificates (the "OFFERED CERTIFICATES") offered hereby and by supplements hereto (each, a "PROSPECTUS SUPPLEMENT") will be offered from time to time in one or more series (each, a "SERIES"). The Offered Certificates of any Series, together with any other pass-through certificates of such Series, are collectively referred to herein as the "CERTIFICATES". Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a trust fund (with respect to any Series, the "TRUST FUND") consisting of one or more segregated pools of various types of multifamily or commercial mortgage loans (the "MORTGAGE LOANS"), mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by multifamily or commercial mortgage loans (collectively, the "CMBS") or a combination of Mortgage Loans and/or CMBS (with respect to any Series, collectively, the "MORTGAGE ASSETS"). If so specified in the related Prospectus Supplement, some or all of the Mortgage Loans will include assignments of the leases of the related Mortgaged Properties (as defined herein) and/or assignments of the rental payments due from the lessees under such leases (each type of assignment, a "LEASE ASSIGNMENT"). A significant or the sole source of payments on certain Commercial Loans (as defined herein) and, therefore, of distributions on certain Series of Certificates, will be such rent payments. If so specified in the related Prospectus Supplement, the Trust Fund for a Series of Certificates may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or any combination thereof (with respect to any Series, collectively, "CREDIT SUPPORT"), and currency or interest rate exchange agreements and other financial assets, or any combination thereof (with respect to any Series, collectively, "CASH FLOW AGREEMENTS"). See "Description of the Trust Funds," "Description of the Certificates" and "Description of Credit Support." RETAIN THIS PROSPECTUS FOR FUTURE REFERENCE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE OFFERED CERTIFICATES OF ANY SERIES UNLESS ACCOMPANIED BY THE PROSPECTUS SUPPLEMENT FOR SUCH SERIES. (COVER CONTINUED ON NEXT PAGE) _________________________________ PROCEEDS OF THE ASSETS IN THE TRUST FUND ARE THE SOLE SOURCE OF PAYMENTS ON THE OFFERED CERTIFICATES. THE CERTIFICATES OF EACH SERIES WILL NOT REPRESENT AN INTEREST IN OR OBLIGATION OF THE DEPOSITOR, ANY MASTER SERVICER, ANY SPECIAL SERVICER, ANY PRIMARY SERVICER, ICI FUNDING CORPORATION, THE TRUSTEE, THE UNDERWRITER OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THE CERTIFICATES NOR ANY ASSETS IN THE RELATED TRUST FUND WILL BE INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON, TO THE EXTENT PROVIDED IN THE RELATED PROSPECTUS SUPPLEMENT. THE ASSETS IN EACH TRUST FUND WILL BE HELD IN TRUST FOR THE BENEFIT OF THE HOLDERS OF THE RELATED SERIES OF CERTIFICATES PURSUANT TO A POOLING AND SERVICING AGREEMENT AND ONE OR MORE SERVICING AGREEMENTS, OR A TRUST AGREEMENT, AS MORE FULLY DESCRIBED HEREIN. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE RELATED PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. _________________________________ Prospective investors should review the information appearing under the caption "Risk Factors" beginning on page __ herein and such information as may be set forth under the caption "Risk Factors" in the related Prospectus Supplement before purchasing any Offered Certificate. Prior to issuance there will have been no market for the Certificates of any Series and there can be no assurance that a secondary market for any Offered Certificates will develop or that, if it does develop, it will continue. This Prospectus may not be used to consummate sales of the Offered Certificates of any Series unless accompanied by the Prospectus Supplement for such Series. Offers of the Offered Certificates may be made through one or more different methods, including offerings through underwriters as more fully described under "Method of Distribution" herein and in the related Prospectus Supplement. THE DATE OF THIS PROSPECTUS IS __________________, 1998 Each Series of Certificates will consist of one or more classes of Certificates that may (i) provide for the accrual of interest thereon based on fixed, variable or floating rates; (ii) be senior or subordinate to one or more other classes of Certificates in respect of certain distributions on the Certificates; (iii) be entitled to principal distributions, with disproportionately low, nominal or no interest distributions; (iv) be entitled to interest distributions, with disproportionately low, nominal or no principal distributions; (v) provide for distributions of accrued interest thereon commencing only following the occurrence of certain events, such as the retirement of one or more other classes of Certificates of such Series; (vi) provide for distributions of principal sequentially, based on specified payment schedules or other methodologies; and/or (vii) provide for distributions based on a combination of two or more components thereof with one or more of the characteristics described in this paragraph, to the extent of available funds, in each case as described in the related Prospectus Supplement. Any such classes may include classes of Offered Certificates. See "Description of the Certificates." Principal and interest with respect to Certificates will be distributable monthly, quarterly, semi-annually or at such other intervals and on the dates specified in the related Prospectus Supplement. Distributions on the Certificates of any Series will be made only from the assets of the related Trust Fund. The yield on each class of Certificates of a Series will be affected by, among other things, the rate of payment of principal (including prepayments, repurchase and defaults) on the Mortgage Assets in the related Trust Fund and the timing of receipt of such payments as described under the caption "Yield Considerations" herein and under the caption "Certain Prepayment, Maturity and Yield Considerations" in the related Prospectus Supplement. A Trust Fund may be subject to early termination under the circumstances described herein and in the related Prospectus Supplement. All CMBS will have been acquired for inclusion in a Trust Fund in purely secondary transactions from a seller other than the issuer thereof and any of its affiliates. The factors considered by the Registrant in determining that the CMBS have been acquired in purely secondary market transactions include the following: the Depositor's historical relationship with the underlying issuer, whether or not any distribution by the Depositor with respect to other securities of that issuer is presently occurring or being considered, whether the Depositor was involved in the initial distribution of the underlying securities, and the period of time elapsed between initial distribution and the securitization transaction. If so provided in the related Prospectus Supplement, one or more elections may be made to treat the related Trust Fund or a designated portion thereof as a "real estate mortgage investment conduit" (each, a "REMIC") for federal income tax purposes. See "Federal Income Tax Consequences" herein. Until 90 days after the date of each Prospectus Supplement, all dealers effecting transactions in the Offered Certificates covered by such Prospectus Supplement, whether or not participating in the distribution thereof, may be required to deliver such Prospectus Supplement and this Prospectus. This is in addition to the obligation of dealers to deliver a Prospectus and Prospectus Supplement when acting as underwriters and with respect to their unsold allotments or subscriptions. No person has been authorized to give any information or to make any representations other than those contained in this Prospectus and any Prospectus Supplement with respect hereto and, if given or made, such information or representations must not be relied upon. This Prospectus and any Prospectus Supplement with respect hereto do not constitute an offer to sell or a solicitation of an offer to buy any securities other than the Offered Certificates or an offer of the Offered Certificates to any person in any state or other jurisdiction in which such offer would be unlawful. The delivery of this Prospectus at any time does not imply that information herein is correct as of any time subsequent to its date; however, if any material change occurs while this Prospectus is required by law to be delivered, this Prospectus will be amended or supplemented accordingly. PROSPECTUS SUPPLEMENT As more particularly described herein, the Prospectus Supplement relating to the Offered Certificates of each Series will, among other things, set forth with respect to such Certificates, as appropriate: (i) a description of the class or classes of Certificates, the payment provisions with respect to each such class and the Pass-Through Rate or method of determining the Pass-Through Rate with respect to each such class; (ii) the aggregate principal amount and distribution dates relating to such Series and, if applicable, the initial and final scheduled distribution dates for each class; (iii) information as to the assets comprising the Trust Fund, including the general characteristics of the assets included therein, including the Mortgage Assets and any Credit Support and Cash Flow Agreements (with respect to the Certificates of any Series, the "TRUST ASSETS"); (iv) the circumstances, if any, under which the Trust Fund may be subject to early termination; (v) additional information with respect to the method of distribution of such Certificates; - 2 - (vi) whether one or more REMIC elections will be made and designation of the regular interests and residual interests; (vii) the aggregate original percentage ownership interest in the Trust Fund to be evidenced by each class of Certificates; (viii) information as to any Master Servicer, any Primary Servicer, any Special Servicer (or provision for the appointment thereof) and the Trustee, as applicable; (ix) information as to the nature and extent of subordination with respect to any class of Certificates that is subordinate in right of payment to any other class; and (x) whether such Certificates will be initially issued in definitive or book-entry form. AVAILABLE INFORMATION The Depositor has filed with the Securities and Exchange Commission (the "COMMISSION") a Registration Statement (of which this Prospectus forms a part) under the Securities Act of 1933, as amended (the "SECURITIES ACT"), with respect to the Offered Certificates. This Prospectus and the Prospectus Supplement relating to each Series of Certificates contain summaries of the material terms of the documents referred to herein and therein, but do not contain all of the information set forth in the Registration Statement pursuant to the rules and regulations of the Commission. For further information, reference is made to such Registration Statement and the exhibits thereto. Such Registration Statement and exhibits can be inspected and copied at prescribed rates at the public reference facilities maintained by the Commission at its Public Reference Section, 450 Fifth Street, N.W, Washington, D.C. 20549, and at its Regional Offices located as follows: Midwest Regional Office, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661; and Northeast Regional Office, Seven World Trade Center, Suite 1300, New York, New York 10048. The Commission maintains a Web site at http://www.sec.gov containing reports, proxy and information statements and other information regarding registrants, including the Depositor, that file electronically with the Commission. To the extent described in the related Prospectus Supplement, some or all of the Mortgage Loans may be secured by an assignment of the lessors' (I.E., the related Mortgagors') rights in one or more leases (each, a "LEASE") on the related Mortgaged Property. Unless otherwise specified in the related Prospectus Supplement, no Series of Certificates will represent interests in or obligations of any lessee (each, a "LESSEE") under a Lease. If indicated, however, in the Prospectus Supplement for a given Series, a significant or the sole source of payments on the Mortgage Loans in such Series, and, therefore, of distributions on such Certificates, will be rental payments due from the Lessees under the Leases. Under such circumstances, prospective investors in the related Series of Certificates may wish to consider publicly available information, if any, concerning the Lessees. Reference should be made to the related Prospectus Supplement for information concerning the Lessees and whether any such Lessees are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). A Master Servicer or the Trustee will be required to mail to holders of Definitive Certificates (as defined herein) of each Series periodic unaudited reports concerning the related Trust Fund. Unless and until Definitive Certificates are issued, or to the extent provided in the related Prospectus Supplement, such reports will be sent on behalf of the related Trust Fund to Cede & Co. ("CEDE"), as nominee of The Depository Trust Company ("DTC") and registered holder of the Offered Certificates, pursuant to the applicable Agreement. Such reports may be available to Beneficial Owners (as defined herein) in the Certificates upon request to their respective DTC Participants or Indirect Participants (as defined herein). See "Description of the Certificates - -- Reports to Certificateholders" and "Description of the Agreements -- Evidence as to Compliance." The Depositor will file or cause to be filed with the Commission such periodic reports with respect to each Trust Fund as are required under the Exchange Act, and the rules and regulations of the Commission thereunder. The Depositor intends to make a written request to the staff of the Commission that the staff either (i) issue an order pursuant to Section 12(h) of the Exchange Act exempting the Depositor from certain reporting requirements under the Exchange Act with respect to each Trust Fund or (ii) state that the staff will not recommend that the Commission take enforcement action if the Depositor fulfills its reporting obligations as described in its written request. If such request is granted, the Depositor will file or cause to be filed with the Commission as to each Trust Fund the periodic unaudited reports to holders of the Offered Certificates referenced in the preceding paragraph; however, because of the nature of the Trust Funds, it is unlikely that any significant additional information will be filed. In addition, because of the limited number of Certificateholders expected for each series, the Depositor anticipates that a significant portion of such reporting requirements will be permanently suspended following the first fiscal year for the related Trust Fund. - 3 - INCORPORATION OF CERTAIN INFORMATION BY REFERENCE There are incorporated herein by reference all documents and reports filed or caused to be filed by the Depositor with respect to a Trust Fund pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of an offering of Offered Certificates evidencing interests therein. The Depositor will provide or cause to be provided without charge to each person to whom this Prospectus is delivered in connection with the offering of one or more classes of Offered Certificates, upon written or oral request of such person, a copy of any or all documents or reports incorporated herein by reference, in each case to the extent such documents or reports relate to one or more of such classes of such Offered Certificates, other than the exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents). Requests to the Depositor should be directed in writing to ICIFC Secured Assets Corp., 20371 Irvine Avenue, Suite 200, Santa Ana Heights, California 92707, Attention: ________________________. The Depositor has determined that its financial statements are not material to the offering of any Offered Certificates. - 4 - TABLE OF CONTENTS (continued) TABLE OF CONTENTS PROSPECTUS SUPPLEMENT.........................................................2 AVAILABLE INFORMATION.........................................................3 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................................................4 SUMMARY OF PROSPECTUS.........................................................8 RISK FACTORS.................................................................14 Limited Liquidity.......................................................14 Limited Assets..........................................................14 Prepayments and Effect on Average Life of Certificates and Yields..........................................14 Limited Nature of Ratings...............................................15 Risks Associated with Mortgage Loans and Mortgaged Properties............................................15 Risks Associated with Commercial Loans and Leases..........................................................16 Balloon Payments........................................................16 Junior Mortgage Loans...................................................17 Obligor Default.........................................................17 Mortgagor Type..........................................................17 Credit Support Limitations..............................................17 Enforceability..........................................................18 Environmental Risks.....................................................18 Delinquent and Non-Performing Mortgage Loans......................................................19 ERISA Considerations....................................................19 Certain Federal Tax Considerations Re- garding REMIC Residual Certificates.................................19 Control.................................................................19 Book-Entry Registration.................................................19 DESCRIPTION OF THE TRUST FUNDS...............................................19 Assets..................................................................20 Mortgage Loans..........................................................20 CMBS....................................................................23 Accounts................................................................24 Credit Support..........................................................24 Cash Flow Agreements....................................................25 USE OF PROCEEDS..............................................................25 YIELD CONSIDERATIONS.........................................................25 General.................................................................25 Pass-Through Rate.......................................................25 Timing of Payment of Interest...........................................25 Payments of Principal; Prepayments......................................26 Prepayments -- Maturity and Weighted Average Life........................................................26 Other Factors Affecting Weighted Average Life........................................................27 THE DEPOSITOR................................................................28 DESCRIPTION OF THE CERTIFICATES..............................................28 General.................................................................28 Distributions...........................................................29 Available Distribution Amount...........................................29 Distributions of Interest on the Certificates...........................30 Distributions of Principal of the Certificates..........................30 Components..............................................................31 Distributions on the Certificates of Prepayment Premiums or in Respect of Equity Participations...............................................31 Allocation of Losses and Shortfalls.....................................31 Advances in Respect of Delinquencies....................................31 Reports to Certificateholders...........................................32 Termination.............................................................34 Book-Entry Registration and Definitive Certificates.............................................34 DESCRIPTION OF THE AGREEMENTS................................................35 Assignment of Assets; Repurchases.......................................36 Representations and Warranties; Repurchases.........................................................37 Accounts................................................................38 Collection and Other Servicing Procedures...............................40 Hazard Insurance Policies...............................................43 Rental Interruption Insurance Policy....................................44 Fidelity Bonds and Errors and Omissions Insurance.................................................44 Due-on-Sale and Due-on-Encumbrance Provisions..........................................................44 Retained Interest; Servicing Compensation and Payment of Expenses.............................................44 Evidence as to Compliance...............................................45 Certain Matters Regarding each Servicer and the Depositor...................................................45 Events of Default.......................................................46 Rights Upon Event of Default............................................46 Amendment...............................................................47 The Trustee.............................................................47 Duties of the Trustee...................................................47 Certain Matters Regarding the Trustee...................................48 Resignation and Removal of the Trustee..................................48 DESCRIPTION OF CREDIT SUPPORT................................................48 General.................................................................48 Subordinate Certificates................................................49 Cross-Support Provisions................................................49 Insurance or Guarantees with Respect to the Whole Loans..................................................49 Letter of Credit........................................................49 Insurance Policies and Surety Bonds.....................................50 Reserve Funds...........................................................50 Credit Support with respect to CMBS.....................................50 CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES................................................50 General.................................................................51 Types of Mortgage Instruments...........................................51 - 5 - TABLE OF CONTENTS (continued) Interest in Real Property...............................................51 Leases and Rents........................................................51 Personalty..............................................................52 Cooperative Loans.......................................................52 Foreclosure.............................................................53 Bankruptcy Laws.........................................................57 Environmental Legislation...............................................59 Due-on-Sale and Due-on-Encumbrance......................................61 Subordinate Financing...................................................62 Default Interest, Prepayment Charges and Prepayments.....................................................62 Acceleration on Default.................................................62 Applicability of Usury Laws.............................................62 Certain Laws and Regulations; Types of Mortgaged Properties.............................................63 Americans With Disabilities Act.........................................63 Soldiers' and Sailors' Civil Relief Act of 1940.........................................................63 Forfeitures in Drug and RICO Proceedings................................64 FEDERAL INCOME TAX CONSEQUENCES..............................................64 General.............................................................64 Grantor Trust Funds.....................................................64 REMICs..................................................................70 Prohibited Transactions and Other Taxes.................................82 Liquidation and Termination.............................................82 Administrative Matters..................................................82 Tax-Exempt Investors....................................................83 Residual Certificate Payments to Non-U.S. Persons....................................................83 Tax-Related Restrictions on Transfers of REMIC Residual Certificates.........................................83 STATE TAX CONSIDERATIONS.....................................................85 ERISA CONSIDERATIONS.........................................................85 General.................................................................85 Prohibited Transactions.................................................85 Review by Plan Fiduciaries..............................................86 LEGAL INVESTMENT.............................................................87 METHOD OF DISTRIBUTION.......................................................88 LEGAL MATTERS................................................................89 FINANCIAL INFORMATION........................................................89 RATING.......................................................................89 - 6 - SUMMARY OF PROSPECTUS THE FOLLOWING SUMMARY OF CERTAIN PERTINENT INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS AND BY REFERENCE TO THE INFORMATION WITH RESPECT TO EACH SERIES OF CERTIFICATES CONTAINED IN THE PROSPECTUS SUPPLEMENT TO BE PREPARED AND DELIVERED IN CONNECTION WITH THE OFFERING OF SUCH "SERIES." AN INDEX OF PRINCIPAL DEFINITIONS IS INCLUDED AT THE END OF THIS PROSPECTUS. Title of Certificates.......... Mortgage Pass-Through Certificates, issuable in Series (the "CERTIFICATES"). Depositor...................... ICIFC Secured Assets Corp. (the "DEPOSITOR"), a wholly-owned subsidiary of ICI Funding Corporation. See "The Depositor." Master Servicer................ The master servicer (the "MASTER SERVICER"), if any, for each Series of Certificates, which may be an affiliate of the Depositor, will be named in the related Prospectus Supplement. See "Description of the Agreements-- Collection and Other Servicing Procedures." Special Servicer............... The special servicer (the "SPECIAL SERVICER"), if any, for each Series of Certificates, which may be an affiliate of the Depositor, will be named, or the circumstances in accordance with which a Special Servicer will be appointed will be described, in the related Prospectus Supplement. See "Description of the Agreements -- Special Servicers." Primary Servicer............... The primary servicer (the "PRIMARY SERVICER"), if any, for each Series of Certificates, which may be an affiliate of the Depositor, will be named in the related Prospectus Supplement. See "Description of the Agreements-- Collection and Other Servicing Procedures." Trustee ...................... The trustee (the "TRUSTEE") for each Series of Certificates will be named in the related Prospectus Supplement. See "Description of the Agreements -- The Trustee." The Trust Assets............... Each Series of Certificates will represent in the aggregate the entire beneficial ownership interest in a Trust Fund consisting of: (a) Mortgage Assets............ The Mortgage Assets with respect to each Series of Certificates will consist of a pool of multifamily and/or commercial mortgage loans (collectively, the "MORTGAGE LOANS") and/or mortgage participations, mortgage pass-through certificates or other mortgage-backed securities evidencing interests in or secured by Mortgage Loans (collectively, the "CMBS") or a combination of Mortgage Loans and CMBS. The Mortgage Loans will not be guaranteed or insured by the Depositor or any of its affiliates or, unless otherwise provided in the Prospectus Supplement, by any governmental agency or instrumentality or other person. The CMBS may be guaranteed or insured by an affiliate of the Depositor, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Government National Mortgage Association, or any other person specified in the related Prospectus Supplement. As more specifically described herein, the Mortgage Loans will be secured by first or junior liens on, or security interests in, properties consisting of (i) residential properties consisting of five or more rental or cooperatively owned dwelling units (the "MULTIFAMILY PROPERTIES") or (ii) office buildings, retail centers, hotels or motels, health care-related facilities, industrial properties, mini-warehouse facilities or self-storage facilities, mobile home parks, condominiums, mixed use or other types of commercial properties (the "COMMERCIAL PROPERTIES"). The term "MORTGAGED PROPERTIES" shall refer to Multifamily Properties or Commercial Properties, or both. To the extent described in the related Prospectus Supplement, some or all of the Mortgage Loans may also be secured by an assignment of one or more leases (each, a "LEASE") of one or more lessees (each, a "LESSEE") of all or a portion of the related Mortgaged Properties. To the extent specified in the related Prospectus - 7 - Supplement, a significant or the sole source of payments on certain Commercial Loans (as defined herein) will be the rental payments due under the related Leases. In certain circumstances, with respect to Commercial Properties, the material terms and conditions of the related Leases may be set forth in the related Prospectus Supplement. See "Description of the Trust Funds -- Mortgage Loans -- Leases" and "Risk Factors -- Limited Assets" herein. The Mortgaged Properties may be located in the United States or its territories. All Mortgage Loans will have individual principal balances at origination of not less than $250,000 and original terms to maturity of not more than 40 years. All Mortgage Loans will have been originated by persons other than the Depositor, and all Mortgage Assets will have been purchased, either directly or indirectly, by the Depositor on or before the date of initial issuance of the related Series of Certificates. The related Prospectus Supplement will indicate if any such persons are affiliates of the Depositor. Each Mortgage Loan may provide for no accrual of interest or for accrual of interest thereon at an interest rate (a "MORTGAGE INTEREST RATE") that is fixed over its term or that adjusts from time to time, or is partially fixed and partially floating or that may be converted from a floating to a fixed Mortgage Interest Rate, or from a fixed to a floating Mortgage Interest Rate, from time to time at the Mortgagor's election, in each case as described in the related Prospectus Supplement. The floating Mortgage Interest Rates on the Mortgage Loans in a Trust Fund may be based on one or more indices. Each Mortgage Loan may provide for scheduled payments to maturity, payments that adjust from time to time to accommodate changes in the Mortgage Interest Rate or to reflect the occurrence of certain events, and may provide for negative amortization or accelerated amortization, in each case as described in the related Prospectus Supplement. Each Mortgage Loan may be fully amortizing or require a balloon payment due on its stated maturity date, in each case as described in the related Prospectus Supplement. Each Mortgage Loan may contain prohibitions on prepayment or require payment of a premium or a yield maintenance penalty in connection with a prepayment, in each case as described in the related Prospectus Supplement. The Mortgage Loans may provide for payments of principal, interest or both, on due dates that occur monthly, quarterly, semi-annually or at such other interval as is specified in the related Prospectus Supplement. See "Description of the Trust Funds -- Assets." (b) Collection Accounts........ Each Trust Fund will include one or more accounts established and maintained on behalf of the Certificateholders into which the person or persons designated in the related Prospectus Supplement will, to the extent described herein and in such Prospectus Supplement, deposit all payments and collections received or advanced with respect to the Mortgage Assets and other assets in the Trust Fund. Such an account may be maintained as an interest bearing or a non-interest bearing account, and funds held therein may be held as cash or invested in certain short-term, investment grade obligations, in each case as described in the related Prospectus Supplement. See "Description of the Agreements-- Distribution Account and Other Collection Accounts." (c) Credit Support............. If so provided in the related Prospectus Supplement, partial or full protection against certain defaults and losses on the Mortgage Assets in the related Trust Fund may be provided to one or more classes of Certificates of the related Series in the form of subordination of one or more other classes of Certificates of such Series, which other classes may include one or more classes of Offered Certificates, or by one or more other types of credit support, such as a letter of credit, insurance policy, guarantee, reserve fund or another type of credit support, or a combination thereof (any such coverage with respect to the Certificates of any Series, "CREDIT SUPPORT"). The amount and types of coverage, the identification of the entity providing the coverage (if applicable) and related information with respect to each type of Credit Support, if any, will be described in the Prospectus Supplement for a Series of Certificates. The Prospectus Supplement for any Series of Certificates - 8 - evidencing an interest in a Trust Fund that includes CMBS will describe any similar forms of credit support that are provided by or with respect to, or are included as part of the trust fund evidenced by or providing security for, such CMBS. See "Risk Factors -- Credit Support Limitations" and "Description of Credit Support." (d) Cash Flow Agreement........ If so provided in the related Prospectus Supplement, the Trust Fund may include guaranteed investment contracts pursuant to which moneys held in the funds and accounts established for the related Series will be invested at a specified rate. The Trust Fund may also include certain other agreements, such as interest rate exchange agreements, interest rate cap or floor agreements, currency exchange agreements or similar agreements provided to reduce the effects of interest rate or currency exchange rate fluctuations on the Mortgage Assets of one or more classes of Certificates. The principal terms of any such guaranteed investment contract or other agreement (any such agreement, a "CASH FLOW AGREEMENT"), including, without limitation, provisions relating to the timing, manner and amount of payments thereunder and provisions relating to the termination thereof, will be described in the Prospectus Supplement for the related Series. In addition, the related Prospectus Supplement will provide certain information with respect to the obligor under any such Cash Flow Agreement. The Prospectus Supplement for any Series of Certificates evidencing an interest in a Trust Fund that includes CMBS will describe any cash flow agreements that are included as part of the trust fund evidenced by or providing security for such CMBS. See "Description of the Trust Funds-- Cash Flow Agreements." Description of Certificates.... Each Series of Certificates evidencing an interest in a Trust Fund that includes Mortgage Loans as part of its assets will be issued pursuant to a pooling and servicing agreement, and each Series of Certificates evidencing an interest in a Trust Fund that does not include Mortgage Loans will be issued pursuant to a trust agreement. To the extent specified in the Prospectus Supplement, the Mortgage Loans shall be serviced pursuant to a pooling and servicing agreement and one or more servicing agreements. Pooling and servicing agreements, servicing agreements and trust agreements are referred to herein as the "AGREEMENTS". Each Series of Certificates will include one or more classes. Each Series of Certificates (including any class or classes of Certificates of such Series not offered hereby) will represent in the aggregate the entire beneficial ownership interest in the Trust Fund. Each class of Certificates (other than certain Stripped Interest Certificates, as defined below) will have a stated principal amount (a "CERTIFICATE BALANCE") and (other than certain Stripped Principal Certificates, as defined below), will accrue interest thereon based on a fixed, variable or floating interest rate (a "PASS- THROUGH RATE"). The related Prospectus Supplement will specify the Certificate Balance, if any, and the Pass-Through Rate, if any, for each class of Certificates or, in the case of a variable or floating Pass-Through Rate, the method for determining the Pass-Through Rate. Distributions on Certificates.. Each Series of Certificates will consist of one or more classes of Certificates that may (i) provide for the accrual of interest thereon based on fixed, variable or floating rates; (ii) be senior (collectively, "SENIOR CERTIFICATES") or subordinate (collectively, "SUBORDINATE CERTIFICATES") to one or more other classes of Certificates in respect of certain distributions on the Certificates; (iii) be entitled to principal distributions, with disproportionately low, nominal or no interest distributions (collectively, "STRIPPED PRINCIPAL CERTIFICATES"); (iv) be entitled to interest distributions, with disproportionately low, nominal or no principal distributions (collectively, "STRIPPED INTEREST CERTIFICATES"); (v) provide for distributions of accrued interest thereon commencing only following the occurrence of certain events, such as the retirement of one or more other classes of Certificates of such Series (collectively, "ACCRUAL CERTIFICATES"); (vi) provide for distributions of principal sequentially, based on specified payment schedules or other methodologies; and/or (vii) provide for distributions based on a combination of two or more components thereof with one or more of the characteristics described in - 9 - this paragraph, including a Stripped Principal Certificate component and a Stripped Interest Certificate component, to the extent of available funds, in each case as described in the related Prospectus Supplement. Any such classes may include classes of Offered Certificates. With respect to Certificates with two or more components, references herein to Certificate Balance, notional amount and Pass-Through Rate refer to the principal balance, if any, notional amount, if any, and the Pass-Through Rate, if any, for any such component. The Certificates will not be guaranteed or insured by the Depositor or any of its affiliates, by any governmental agency or instrumentality or by any other person, unless otherwise provided in the related Prospectus Supplement. See "Risk Factors -- Limited Assets" and "Description of the Certificates." (a) Interest................... Interest on each class of Offered Certificates (other than Stripped Principal Certificates and certain classes of Stripped Interest Certificates) of each Series will accrue at the applicable Pass-Through Rate on the outstanding Certificate Balance thereof and will be distributed to Certificateholders as provided in the related Prospectus Supplement (each of the specified dates on which distributions are to be made, a "DISTRIBUTION DATE"). Distributions with respect to interest on Stripped Interest Certificates may be made on each Distribution Date on the basis of a notional amount as described in the related Prospectus Supplement. Distributions of interest with respect to one or more classes of Certificates may be reduced to the extent of certain delinquencies, losses, prepayment interest shortfalls, and other contingencies described herein and in the related Prospectus Supplement. Stripped Principal Certificates with no stated Pass-Through Rate will not accrue interest. See "Risk Factors-- Prepayments and Effect on Average Life of Certificates and Yields," "Yield Considerations" and "Description of the Certificates-- Distributions of Interest on the Certificates." (b) Principal.................. The Certificates of each Series initially will have an aggregate Certificate Balance no greater than the outstanding principal balance of the Mortgage Assets as of, unless the related Prospectus Supplement provides otherwise, the close of business on the first day of the month of formation of the related Trust Fund (the "CUT-OFF DATE"), after application of scheduled payments due on or before such date, whether or not received. The Certificate Balance of a Certificate outstanding from time to time represents the maximum amount that the holder thereof is then entitled to receive in respect of principal from future cash flow on the assets in the related Trust Fund. To the extent provided in the related Prospectus Supplement, distributions of principal will be made on each Distribution Date to the class or classes of Certificates entitled thereto until the Certificate Balances of such Certificates have been reduced to zero. To the extent specified in the related Prospectus Supplement, distributions of principal of any class of Certificates will be made on a pro rata basis among all of the Certificates of such class or by random selection, as described in the related Prospectus Supplement or otherwise established by the related Trustee. Stripped Interest Certificates with no Certificate Balance will not receive distributions in respect of principal. See "Description of the Certificates-- Distributions of Principal of the Certificates." Advances....................... To the extent provided in the related Prospectus Supplement, the Primary Servicer, the Special Servicer or the Master Servicer (each, a "SERVICER") will be obligated as part of its servicing responsibilities to make certain advances with respect to delinquent scheduled payments on the Whole Loans in such Trust Fund which it deems recoverable. Any such advances will be made under and subject to any determinations or conditions set forth in the related Prospectus Supplement. Neither the Depositor nor any of its affiliates will have any responsibility to make such advances. Advances made by a Master Servicer are reimbursable generally from subsequent recoveries in respect of such Whole Loans and otherwise to the extent described herein and in the related Prospectus Supplement. If and to the extent provided in the Prospectus Supplement for any Series, each Servicer will be entitled to receive interest on its outstanding advances, payable from amounts in the - 10 - related Trust Fund. The Prospectus Supplement for any Series of Certificates evidencing an interest in a Trust Fund that includes CMBS will describe any corresponding advancing obligation of any person in connection with such CMBS. See "Description of the Certificates -- Advances in Respect of Delinquencies." Termination.................... If so specified in the related Prospectus Supplement, a Series of Certificates may be subject to optional early termination through the repurchase of the Mortgage Assets in the related Trust Fund by the party specified therein, under the circumstances and in the manner set forth therein. If so provided in the related Prospectus Supplement, upon the reduction of the Certificate Balance of a specified class or classes of Certificates by a specified percentage or amount or on and after a date specified in such Prospectus Supplement, the party specified therein will solicit bids for the purchase of all of the Mortgage Assets of the Trust Fund, or of a sufficient portion of such Mortgage Assets to retire such class or classes, or purchase such Mortgage Assets at a price set forth in the related Prospectus Supplement. In addition, if so provided in the related Prospectus Supplement, certain classes of Certificates may be purchased subject to similar conditions. See "Description of the Certificates-- Termination." Registration of Certificates... If so provided in the related Prospectus Supplement, one or more classes of the Offered Certificates will initially be represented by one or more Certificates registered in the name of Cede & Co., as the nominee of DTC. No person acquiring an interest in Offered Certificates so registered will be entitled to receive a definitive certificate representing such person's interest except in the event that definitive certificates are issued under the limited circumstances described herein. See "Risk Factors-- Book-Entry Registration" and "Description of the Certificates -- Book-Entry Registration and Definitive Certificates." Tax Status of the Certificates. The Certificates of each Series will constitute either (i) "regular interests" ("REMIC REGULAR CERTIFICATES") or a single class of "residual interests" ("REMIC RESIDUAL CERTIFICATES") in a Trust Fund or a portion of a Trust Fund treated as a real estate mortgage investment conduit ("REMIC") under Sections 860A through 860G of the Internal Revenue Code of 1986, as amended (the "CODE"), or (ii) interests ("GRANTOR TRUST CERTIFICATES") in a Trust Fund treated as a grantor trust under applicable provisions of the Code. (a) REMIC...................... REMIC Regular Certificates generally will be treated as debt obligations of the applicable REMIC for federal income tax purposes. Certain REMIC Regular Certificates may be issued with original issue discount for federal income tax purposes. See "Federal Income Tax Consequences" herein and in the related Prospectus Supplement. The Offered Certificates will be treated as (i) assets described in section 7701(a)(19)(C) of the Code and (ii) "real estate assets" within the meaning of section 856(c)(5)(A) of the Code, in each case to the extent described herein and in the related Prospectus Supplement. See "Federal Income Tax Consequences" herein and in the related Prospectus Supplement. (b) Grantor Trust.............. If no election is made to treat the Trust Fund relating to a Series of Certificates as a REMIC, the Trust Fund will be classified as a grantor trust and not as an association taxable as a corporation for federal income tax purposes, and therefore holders of Certificates will be treated as the owners of undivided pro rata interests in the Mortgage Pool or pool of securities and any other assets held by the Trust Fund. Investors are urged to consult their tax advisors and to review "Federal Income Tax Consequences" herein and in the related Prospectus Supplement. ERISA Considerations........... A fiduciary of an employee benefit plan and certain other retirement plans and arrangements, including individual retirement accounts, annuities, Keogh plans, - 11 - and collective investment funds and separate accounts in which such plans, accounts, annuities or arrangements are invested and any entity whose underlying assets include assets of such a plan by reason of any such plan's investment in the entity, that is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code should carefully review with its legal advisors whether the purchase or holding of Offered Certificates could give rise to a transaction that is prohibited or is not otherwise permissible either under ERISA or Section 4975 of the Code. See "ERISA Considerations" herein and in the related Prospectus Supplement. Certain classes of Certificates may not be transferred unless the Trustee and the Depositor are furnished with a letter of representations or an opinion of counsel to the effect that such transfer will not result in a violation of the prohibited transaction provisions of ERISA and the Code and will not subject the Trustee, the Depositor or the Master Servicer to additional obligations. See "Description of the Certificates -- General" and "ERISA Considerations." Legal Investment............... The related Prospectus Supplement will specify whether the Offered Certificates will constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984. Investors whose investment authority is subject to legal restrictions should consult their own legal advisors to determine whether and to what extent the Offered Certificates constitute legal investments for them. See "Legal Investment" herein and in the related Prospectus Supplement. Rating......................... At the date of issuance, as to each Series, each class of Offered Certificates will be rated not lower than investment grade by one or more nationally recognized statistical rating agencies (each, a "RATING AGENCY"). See "Rating" herein and in the related Prospectus Supplement. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. - 12 - RISK FACTORS Investors should consider, in connection with the purchase of Offered Certificates, among other things, the following factors and certain other factors as may be set forth in "Risk Factors" in the related Prospectus Supplement. LIMITED LIQUIDITY There can be no assurance that a secondary market for the Certificates of any Series will develop or, if it does develop, that it will provide holders with liquidity of investment or will continue while Certificates of such Series remain outstanding. Any such secondary market may provide less liquidity to investors than any comparable market for securities evidencing interests in single family mortgage loans. The market value of Certificates will fluctuate with changes in prevailing rates of interest. Consequently, sale of Certificates by a holder in any secondary market that may develop may be at a discount from 100% of their original principal balance or from their purchase price. Furthermore, secondary market purchasers may look only hereto, to the related Prospectus Supplement and to the reports to Certificateholders delivered pursuant to the related Agreement as described herein under the heading "Description of the Certificates -- Reports to Certificateholders," "--Book-Entry Registration and Definitive Certificates" and "Description of the Agreements -- Evidence as to Compliance" for information concerning the Certificates. Except to the extent described herein and in the related Prospectus Supplement, Certificateholders will have no redemption rights and the Certificates are subject to early retirement only under certain specified circumstances described herein and in the related Prospectus Supplement. See "Description of the Certificates -- Termination." LIMITED ASSETS The Certificates will not represent an interest in or obligation of the Depositor, any Servicer, or any of their affiliates. The only obligations with respect to the Certificates or the Mortgage Assets will be the obligations (if any) of the Depositor (or, if otherwise provided in the related Prospectus Supplement, the person identified therein as the person making certain representations and warranties with respect to the Mortgage Loans, as applicable, the "WARRANTING PARTY") pursuant to certain limited representations and warranties made with respect to the Mortgage Loans. Since certain representations and warranties with respect to the Mortgage Assets may have been made and/or assigned in connection with transfers of such Mortgage Assets prior to the Closing Date, the rights of the Trustee and the Certificateholders with respect to such representations or warranties will be limited to their rights as an assignee thereof. Unless otherwise specified in the related Prospectus Supplement, none of the Depositor, any Servicer or any affiliate thereof will have any obligation with respect to representations or warranties made by any other entity. Unless otherwise specified in the related Prospectus Supplement, neither the Certificates nor the underlying Mortgage Assets will be guaranteed or insured by any governmental agency or instrumentality, or by the Depositor, any Servicer or any of their affiliates. Proceeds of the assets included in the related Trust Fund for each Series of Certificates (including the Mortgage Assets and any form of credit enhancement) will be the sole source of payments on the Certificates, and there will be no recourse to the Depositor or any other entity in the event that such proceeds are insufficient or otherwise unavailable to make all payments provided for under the Certificates. Unless otherwise specified in the related Prospectus Supplement, a Series of Certificates will not have any claim against or security interest in the Trust Funds for any other Series. If the related Trust Fund is insufficient to make payments on such Certificates, no other assets will be available for payment of the deficiency. Additionally, certain amounts remaining in certain funds or accounts, including the Distribution Account, the Collection Account and any accounts maintained as Credit Support, may be withdrawn under certain conditions, as described in the related Prospectus Supplement. In the event of such withdrawal, such amounts will not be available for future payment of principal of or interest on the Certificates. If so provided in the Prospectus Supplement for a Series of Certificates consisting of one or more classes of Subordinate Certificates, on any Distribution Date in respect of which losses or shortfalls in collections on the Trust Assets have been incurred, the amount of such losses or shortfalls will be borne first by one or more classes of the Subordinate Certificates, and, thereafter, by the remaining classes of Certificates in the priority and manner and subject to the limitations specified in such Prospectus Supplement. PREPAYMENTS AND EFFECT ON AVERAGE LIFE OF CERTIFICATES AND YIELDS Prepayments (including those caused by defaults) on the Mortgage Assets in any Trust Fund generally will result in a faster rate of principal payments on one or more classes of the related Certificates than if payments on such Mortgage Assets were made as scheduled. Thus, the prepayment experience on the Mortgage Assets may affect the average life of each class of related Certificates. The rate of principal payments on pools of mortgage loans varies between pools and from time to time is influenced by a variety of economic, demographic, geographic, social, tax, legal and other factors. There can be no assurance as to the rate of prepayment on the Mortgage Assets in any Trust Fund or - 13 - that the rate of payments will conform to any model described herein or in any Prospectus Supplement. If prevailing interest rates fall significantly below the applicable mortgage interest rates, principal prepayments are likely to be higher than if prevailing rates remain at or above the rates borne by the Mortgage Loans underlying or comprising the Mortgage Assets in any Trust Fund. As a result, the actual maturity of any class of Certificates could occur significantly earlier than expected. A Series of Certificates may include one or more classes of Certificates with priorities of payment and, as a result, yields on other classes of Certificates, including classes of Offered Certificates, of such Series may be more sensitive to prepayments on Mortgage Assets. A Series of Certificates may include one or more classes offered at a significant premium or discount. Yields on such classes of Certificates will be sensitive, and in some cases extremely sensitive, to prepayments on Mortgage Assets and, where the amount of interest payable with respect to a class is disproportionately high, as compared to the amount of principal, as with certain classes of Stripped Interest Certificates, a holder might, in some prepayment scenarios, fail to recoup its original investment. A Series of Certificates may include one or more classes of Certificates, including classes of Offered Certificates, that provide for distribution of principal thereof from amounts attributable to interest accrued but not currently distributable on one or more classes of Accrual Certificates and, as a result, yields on such Certificates will be sensitive to (a) the provisions of such Accrual Certificates relating to the timing of distributions of interest thereon and (b) if such Accrual Certificates accrue interest at a variable or floating Pass-Through Rate, changes in such rate. See "Yield Considerations" herein and, if applicable, in the related Prospectus Supplement. LIMITED NATURE OF RATINGS Any rating assigned by a Rating Agency to a class of Certificates will reflect such Rating Agency's assessment solely of the likelihood that holders of Certificates of such class will receive payments to which such Certificateholders are entitled under the related Agreement. Such rating will not constitute an assessment of the likelihood that principal prepayments (including those caused by defaults) on the related Mortgage Assets will be made, the degree to which the rate of such prepayments might differ from that originally anticipated or the likelihood of early optional termination of the Series of Certificates. Such rating will not address the possibility that prepayment at higher or lower rates than anticipated by an investor may cause such investor to experience a lower than anticipated yield or that an investor purchasing a Certificate at a significant premium might fail to recoup its initial investment under certain prepayment scenarios. Each Prospectus Supplement will identify any payment to which holders of Offered Certificates of the related Series are entitled that is not covered by the applicable rating. The amount, type and nature of credit support, if any, established with respect to a Series of Certificates will be determined on the basis of criteria established by each Rating Agency rating classes of such Series. Such criteria are sometimes based upon an actuarial analysis of the behavior of mortgage loans in a larger group. Such analysis is often the basis upon which each Rating Agency determines the amount of credit support required with respect to each such class. There can be no assurance that the historical data supporting any such actuarial analysis will accurately reflect future experience nor any assurance that the data derived from a large pool of mortgage loans accurately predicts the delinquency, foreclosure or loss experience of any particular pool of Mortgage Assets. No assurance can be given that values of any Mortgaged Properties have remained or will remain at their levels on the respective dates of origination of the related Mortgage Loans. Moreover, there is no assurance that appreciation of real estate values generally will limit loss experiences on the Mortgaged Properties. If the commercial or multifamily residential real estate markets should experience an overall decline in property values such that the outstanding principal balances of the Mortgage Loans underlying or comprising the Mortgage Assets in a particular Trust Fund and any secondary financing on the related Mortgaged Properties become equal to or greater than the value of the Mortgaged Properties, the rates of delinquencies, foreclosures and losses could be higher than those now generally experienced by institutional lenders. In addition, adverse economic conditions (which may or may not affect real property values) may affect the timely payment by Mortgagors of scheduled payments of principal and interest on the Mortgage Loans and, accordingly, the rates of delinquencies, foreclosures and losses with respect to any Trust Fund. To the extent that such losses are not covered by the Credit Support, if any, described in the related Prospectus Supplement, such losses will be borne, at least in part, by the holders of one or more classes of the Certificates of the related Series. See "Description of Credit Support" and "Rating." RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED PROPERTIES Mortgage loans made with respect to multifamily or commercial property may entail risks of delinquency and foreclosure, and risks of loss in the event thereof, that are greater than similar risks associated with single family property. See "Description of the Trust Funds -- Assets." The ability of a Mortgagor to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than any independent income or assets of the Mortgagor; thus, the value of an income-producing property is directly related to the net operating income derived from such property. In contrast, the ability of a Mortgagor to repay a single family - 14 - loan typically is dependent primarily upon the Mortgagor's household income, rather than the capacity of the property to produce income; thus, other than in geographical areas where employment is dependent upon a particular employer or an industry, the Mortgagor's income tends not to reflect directly the value of such property. A decline in the net operating income of an income-producing property will likely affect both the performance of the related loan as well as the liquidation value of such property, whereas a decline in the income of a Mortgagor on a single family property will likely affect the performance of the related loan but may not affect the liquidation value of such property. Moreover, a decline in the value of a Mortgaged Property will increase the risk of loss particularly with respect to any related junior Mortgage Loan. See "--Junior Mortgage Loans." The performance of a mortgage loan secured by an income-producing property leased by the Mortgagor to tenants as well as the liquidation value of such property may be dependent upon the business operated by such tenants in connection with such property, the creditworthiness of such tenants or both; the risks associated with such loans may be offset by the number of tenants or, if applicable, a diversity of types of business operated by such tenants. It is anticipated that a substantial portion of the Mortgage Loans included in any Trust Fund will be nonrecourse loans or loans for which recourse may be restricted or unenforceable, as to which, in the event of Mortgagor default, recourse may be had only against the specific property and such other assets, if any, as have been pledged to secure the related Mortgage Loan. With respect to those Mortgage Loans that provide for recourse against the Mortgagor and its assets generally, there can be no assurance that such recourse will ensure a recovery in respect of a defaulted Mortgage Loan greater than the liquidation value of the related Mortgaged Property. Further, the concentration of default, foreclosure and loss risks in individual Mortgagors or Mortgage Loans in a particular Trust Fund or the related Mortgaged Properties will generally be greater than for pools of single family loans both because the Mortgage Assets in a Trust Fund will generally consist of a smaller number of loans than would a single family pool of comparable aggregate unpaid principal balance and because of the higher principal balance of individual Mortgage Loans. Mortgage Assets in a Trust Fund may consist of only a single or limited number of Mortgage Loans and/or relate to Leases to only a single Lessee or a limited number of Lessees. If applicable, certain legal aspects of the Mortgage Loans for a Series of Certificates may be described in the related Prospectus Supplement. See also "Certain Legal Aspects of the Mortgage Loans and the Leases" herein. RISKS ASSOCIATED WITH COMMERCIAL LOANS AND LEASES If so described in the related Prospectus Supplement, each Mortgagor under a Commercial Loan may be an entity created by the owner or purchaser of the related Commercial Property solely to own or purchase such property, in part to isolate the property from the debts and liabilities of such owner or purchaser. To the extent specified in the related Prospectus Supplement, each such Commercial Loan will represent a nonrecourse obligation of the related Mortgagor secured by the lien of the related Mortgage and the related Lease Assignments. Whether or not such loans are recourse or nonrecourse obligations, it is not expected that the Mortgagors will have any significant assets other than the Commercial Properties and the related Leases, which will be pledged to the Trustee under the related Agreement. Therefore, the payment of amounts due on any such Commercial Loans, and, consequently, the payment of principal of and interest on the related Certificates, will depend primarily or solely on rental payments by the Lessees. Such rental payments will, in turn, depend on continued occupancy by, and/or the creditworthiness of, such Lessees, which in either case may be adversely affected by a general economic downturn or an adverse change in their financial condition. Moreover, to the extent a Commercial Property was designed for the needs of a specific type of tenant (e.g., a nursing home, hotel or motel), the value of such property in the event of a default by the Lessee or the early termination of such Lease may be adversely affected because of difficulty in re-leasing the property to a suitable substitute lessee or, if releasing to such a substitute is not possible, because of the cost of altering the property for another more marketable use. As a result, without the benefit of the Lessee's continued support of the Commercial Property, and absent significant amortization of the Commercial Loan, if such loan is foreclosed on and the Commercial Property is liquidated following a lease default, the net proceeds might be insufficient to cover the outstanding principal and interest owing on such loan, thereby increasing the risk that holders of the Certificates will suffer some loss. BALLOON PAYMENTS Certain of the Mortgage Loans as of the Cut-off Date may not be fully amortizing over their terms to maturity and, thus, will require substantial principal payments (I.E., balloon payments) at their stated maturity (the "BALLOON MORTGAGE LOANS"). Mortgage Loans with balloon payments involve a greater degree of risk because the ability of a Mortgagor to make a balloon payment typically will depend upon its ability either to timely refinance the loan or to timely sell the related Mortgaged Property. The ability of a Mortgagor to accomplish either of these goals will be - 15 - affected by a number of factors, including the level of available mortgage interest rates at the time of sale or refinancing, the Mortgagor's equity in the related Mortgaged Property, the financial condition and operating history of the Mortgagor and the related Mortgaged Property, tax laws, rent control laws (with respect to certain Multifamily Properties and mobile home parks), reimbursement rates (with respect to certain nursing homes), renewability of operating licenses, prevailing general economic conditions and the availability of credit for commercial or multifamily real properties, as the case may be, generally. JUNIOR MORTGAGE LOANS To the extent specified in the related Prospectus Supplement, certain of the Mortgage Loans may be secured primarily by junior mortgages. In the case of liquidation, Mortgage Loans secured by junior mortgages are entitled to satisfaction from proceeds that remain from the sale of the related Mortgaged Property after the mortgage loans senior to such Mortgage Loans have been satisfied. If there are not sufficient funds to satisfy such junior Mortgage Loans and senior mortgage loans, such Mortgage Loans would suffer a loss and, accordingly, one or more classes of Certificates would bear such loss. Therefore, any risks of deficiencies associated with first Mortgage Loans will be greater with respect to junior Mortgage Loans. See "--Risks Associated with Mortgage Loans and Mortgaged Properties." OBLIGOR DEFAULT If so specified in the related Prospectus Supplement, in order to maximize recoveries on defaulted Whole Loans, a Master Servicer or a Special Servicer will be permitted (within prescribed parameters) to extend and modify Whole Loans that are in default or as to which a payment default is imminent, including in particular with respect to balloon payments. In addition, a Master Servicer or a Special Servicer may receive a workout fee based on receipts from or proceeds of such Whole Loans. While any such entity generally will be required to determine that any such extension or modification is reasonably likely to produce a greater recovery on a present value basis than liquidation, there can be no assurance that such flexibility with respect to extensions or modifications or payment of a workout fee will increase the present value of receipts from or proceeds of Whole Loans that are in default or as to which a payment default is imminent. Additionally, if so specified in the related Prospectus Supplement, certain of the Mortgage Loans included in the Mortgage Pool for a Series may have been subject to workouts or similar arrangements following periods of delinquency and default. MORTGAGOR TYPE Mortgage Loans made to partnerships, corporations or other entities may entail risks of loss from delinquency and foreclosure that are greater than those of Mortgage Loans made to individuals. The Mortgagor's sophistication and form of organization may increase the likelihood of protracted litigation or bankruptcy in default situations. CREDIT SUPPORT LIMITATIONS The Prospectus Supplement for a Series of Certificates will describe any Credit Support in the related Trust Fund, which may include letters of credit, insurance policies, guarantees, reserve funds or other types of credit support, or combinations thereof. Use of Credit Support will be subject to the conditions and limitations described herein and in the related Prospectus Supplement. Moreover, such Credit Support may not cover all potential losses or risks; for example, Credit Support may or may not cover fraud or negligence by a mortgage loan originator or other parties. A Series of Certificates may include one or more classes of Subordinate Certificates (which may include Offered Certificates), if so provided in the related Prospectus Supplement. Although subordination is intended to reduce the risk to holders of Senior Certificates of delinquent distributions or ultimate losses, the amount of subordination will be limited and may decline under certain circumstances. In addition, if principal payments on one or more classes of Certificates of a Series are made in a specified order of priority, any limits with respect to the aggregate amount of claims under any related Credit Support may be exhausted before the principal of the lower priority classes of Certificates of such Series has been repaid. As a result, the impact of significant losses and shortfalls on the Trust Assets may fall primarily upon those classes of Certificates having a lower priority of payment. Moreover, if a form of Credit Support covers more than one Series of Certificates (each, a "COVERED TRUST"), holders of Certificates evidencing an interest in a Covered Trust will be subject to the risk that such Credit Support will be exhausted by the claims of other Covered Trusts. The amount of any applicable Credit Support supporting one or more classes of Offered Certificates, including the subordination of one or more classes of Certificates, will be determined on the basis of criteria established by each Rating Agency rating such classes of Certificates based on an assumed level of defaults, delinquencies, other losses or - 16 - other factors. There can, however, be no assurance that the loss experience on the related Mortgage Assets will not exceed such assumed levels. See "--Limited Nature of Ratings," "Description of the Certificates" and "Description of Credit Support." Regardless of the form of credit enhancement provided, the amount of coverage will be limited in amount and in most cases will be subject to periodic reduction in accordance with a schedule or formula. The Master Servicer will generally be permitted to reduce, terminate or substitute all or a portion of the credit enhancement for any Series of Certificates, if the applicable Rating Agency indicates that the then-current rating thereof will not be adversely affected. The rating of any Series of Certificates by any applicable Rating Agency may be lowered following the initial issuance thereof as a result of the downgrading of the obligations of any applicable credit support provider, or as a result of losses on the related Mortgage Assets substantially in excess of the levels contemplated by such Rating Agency at the time of its initial rating analysis. None of the Depositor, the Master Servicer or any of their affiliates will have any obligation to replace or supplement any credit enhancement, or to take any other action to maintain any rating of any Series of Certificates. ENFORCEABILITY Mortgages may contain a due-on-sale clause, which permits the lender to accelerate the maturity of the Mortgage Loan if the Mortgagor sells, transfers or conveys the related Mortgaged Property or its interest in the Mortgaged Property. Mortgages may also include a debt-acceleration clause, which permits the lender to accelerate the debt upon a monetary or non-monetary default of the Mortgagor. Such clauses are generally enforceable subject to certain exceptions. The courts of all states will enforce clauses providing for acceleration in the event of a material payment default. The equity courts of any state, however, may refuse the foreclosure of a mortgage or deed of trust when an acceleration of the indebtedness would be inequitable or unjust or the circumstances would render the acceleration unconscionable. If so specified in the related Prospectus Supplement, the Mortgage Loans will be secured by an assignment of leases and rents pursuant to which the Mortgagor typically assigns its right, title and interest as landlord under the leases on the related Mortgaged Property and the income derived therefrom to the lender as further security for the related Mortgage Loan, while retaining a license to collect rents for so long as there is no default. In the event the Mortgagor defaults, the license terminates and the lender is entitled to collect rents. Such assignments are typically not perfected as security interests prior to actual possession of the cash flows. Some state laws may require that the lender take possession of the Mortgaged Property and obtain a judicial appointment of a receiver before becoming entitled to collect the rents. In addition, if bankruptcy or similar proceedings are commenced by or in respect of the Mortgagor, the lender's ability to collect the rents may be adversely affected. See "Certain Legal Aspects of the Mortgage Loans and the Leases -- Leases and Rents." ENVIRONMENTAL RISKS Real property pledged as security for a mortgage loan may be subject to certain environmental risks. Under the laws of certain states, contamination of a property may give rise to a lien on the property to assure the costs of cleanup. In several states, such a lien has priority over the lien of an existing mortgage against such property. In addition, under the laws of some states and under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") a lender may be liable, as an "owner" or "operator," for costs of addressing releases or threatened releases of hazardous substances that require remedy at a property, if agents or employees of the lender have become sufficiently involved in the operations of the Mortgagor, regardless of whether or not the environmental damage or threat was caused by a prior owner. A lender also risks such liability on foreclosure of the mortgage. Each Pooling and Servicing Agreement will provide that no Servicer, acting on behalf of the Trust Fund, may acquire title to a Mortgaged Property securing a Mortgage Loan or take over its operation unless such Servicer has previously determined, based upon a report prepared by a person who regularly conducts environmental audits, that: (i) the Mortgaged Property is in compliance with applicable environmental laws or, if not, that taking such actions as are necessary to bring the Mortgaged Property in compliance therewith is likely to produce a greater recovery on a present value basis, after taking into account any risks associated therewith, than not taking such actions and (ii) there are no circumstances present at the Mortgaged Property relating to the use, management or disposal of any Hazardous Materials (as defined herein) for which investigation, testing, monitoring, containment, cleanup or remediation could be required under any federal, state or local law or regulation, or that, if any Hazardous Materials are present for which such action would be required, taking such actions with respect to the affected Mortgaged Property is reasonably likely to produce a greater recovery on a present value basis, after taking into account any risks associated therewith, than not taking such actions. Any additional restrictions on acquiring title to a Mortgaged Property may be set forth in the related Prospectus Supplement. See "Certain Legal Aspects of the Mortgage Loans and the Leases -- Environmental Legislation." - 17 - DELINQUENT AND NON-PERFORMING MORTGAGE LOANS If so provided in the related Prospectus Supplement, the Trust Fund for a particular series of Certificates may include Mortgage Loans that are past due or are non-performing. To the extent described in the related Prospectus Supplement, the servicing of such Mortgage Loans as to which a specified number of payments are delinquent will be performed by the Special Servicer; however, the same entity may act as both Master Servicer and Special Servicer. Credit Support provided with respect to a particular series of Certificates may not cover all losses related to such delinquent or nonperforming Mortgage Loans, and investors should consider the risk that the inclusion of such Mortgage Loans in the Trust Fund may adversely affect the rate of defaults and prepayments on the Mortgage Assets in such Trust Fund and the yield on the Certificates of such series. ERISA CONSIDERATIONS Generally, ERISA applies to investments made by employee benefit plans and transactions involving the assets of such plans. Due to the complexity of regulations which govern such plans, prospective investors that are subject to ERISA are urged to consult their own counsel regarding consequences under ERISA of acquisition, ownership and disposition of the Offered Certificates of any Series. CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES Holders of REMIC Residual Certificates will be required to report on their federal income tax returns as ordinary income their PRO RATA share of the taxable income of the REMIC, regardless of the amount or timing of their receipt of cash payments, as described in "Federal Income Tax Consequences -- REMICs." Accordingly, under certain circumstances, holders of Offered Certificates that constitute REMIC Residual Certificates may have taxable income and tax liabilities arising from such investment during a taxable year in excess of the cash received during such period. Individual holders of REMIC Residual Certificates may be limited in their ability to deduct servicing fees and other expenses of the REMIC. In addition, REMIC Residual Certificates are subject to certain restrictions on transfer. Because of the special tax treatment of REMIC Residual Certificates, the taxable income arising in a given year on a REMIC Residual Certificate will not be equal to, and may be substantially more than, the taxable income associated with investment in a corporate bond or stripped instrument having similar cash flow characteristics and pre-tax yield. Therefore, the after-tax yield on the REMIC Residual Certificate may be significantly less than that of a corporate bond or stripped instrument having similar cash flow characteristics. Additionally, prospective purchasers of a REMIC Residual Certificate should be aware that under applicable Treasury regulations REMIC residual interests cannot be marked-to-market. See "Federal Income Tax Consequences -- REMICs." CONTROL Under certain circumstances, the consent or approval of the holders of a specified percentage of the aggregate Certificate Balance of all outstanding Certificates of a Series or a similar means of allocating decision-making under the related Agreement ("VOTING RIGHTS") will be required to direct, and will be sufficient to bind all Certificateholders of such Series to, certain actions, including directing the Special Servicer or the Master Servicer with respect to actions to be taken with respect to certain Mortgage Loans and REO Properties and amending the related Agreement in certain circumstances. See "Description of the Agreements -- Events of Default," "--Rights Upon Event of Default" and "--Amendment." BOOK-ENTRY REGISTRATION If so provided in the Prospectus Supplement, one or more classes of the Certificates will be initially represented by one or more certificates registered in the name of Cede, the nominee for DTC, and will not be registered in the names of the Beneficial Owners or their nominees. Because of this, unless and until Definitive Certificates are issued, Beneficial Owners will not be recognized by the Trustee as "CERTIFICATEHOLDERS" (as that term is to be used in the related Agreement). Hence, until such time, Beneficial Owners will be able to exercise the rights of Certificateholders only indirectly through DTC and its participating organizations. See "Description of the Certificates -- Book-Entry Registration and Definitive Certificates." DESCRIPTION OF THE TRUST FUNDS - 18 - ASSETS The primary assets of each Trust Fund will include (i) one or more multifamily and/or commercial mortgage loans (the "MORTGAGE LOANS"), (ii) mortgage participations, pass-through certificates or other mortgage-backed securities evidencing interests in or secured by one or more Mortgage Loans or other similar participations, certificates or securities (collectively, the "CMBS"), or (iii) a combination of Mortgage Loans and CMBS. As used herein, "Mortgage Loans" refers to both whole Mortgage Loans and Mortgage Loans underlying CMBS. Mortgage Loans that secure, or interests in which are evidenced by, CMBS are herein sometimes referred to as "UNDERLYING MORTGAGE LOANS". Mortgage Loans that are not Underlying Mortgage Loans are sometimes referred to as "WHOLE LOANS". Any mortgage participations, pass-through certificates or other asset-backed certificates in which an CMBS evidences an interest or which secure an CMBS are sometimes referred to herein also as CMBS or as "UNDERLYING CMBS". Mortgage Loans and CMBS are sometimes referred to herein as "MORTGAGE ASSETS". No CMBS originally issued in a private placement will be included as an asset of a Trust Fund until the holding period provided for under Rule 144(k) promulgated under the Securities Act has expired or such CMBS has been registered under the Securities Act. The Mortgage Assets will not be guaranteed or insured by ICIFC Secured Assets Corp. (the "DEPOSITOR") or any of its affiliates or, unless otherwise provided in the related Prospectus Supplement, by any governmental agency or instrumentality or by any other person. Each Mortgage Asset will be selected by the Depositor for inclusion in a Trust Fund from among those purchased, either directly or indirectly, from a prior holder thereof (an "ASSET SELLER"), which may be an affiliate of the Depositor and, with respect to Mortgage Assets, which prior holder may or may not be the originator of such Mortgage Loan or the issuer of such CMBS. To the extent specified in the related Prospectus Supplement, the Certificates will be entitled to payment only from the assets of the related Trust Fund and will not be entitled to payments in respect of the assets of any other trust fund established by the Depositor. If specified in the related Prospectus Supplement, the assets of a Trust Fund will consist of certificates representing beneficial ownership interests in another trust fund that contains the Mortgage Assets. MORTGAGE LOANS GENERAL The Mortgage Loans will be secured by liens on, or security interests in, Mortgaged Properties consisting of (i) residential properties consisting of five or more rental or cooperatively owned dwelling units in high-rise, mid-rise or garden apartment buildings ("MULTIFAMILY PROPERTIES" and the related loans, "MULTIFAMILY LOANS") or (ii) office buildings, retail centers, hotels or motels, health care-related facilities, industrial properties, mini-warehouse facilities or self-storage facilities, mobile home parks, condominiums, mixed use or other types of commercial properties ("COMMERCIAL PROPERTIES" and the related loans, "COMMERCIAL LOANS") located, to the extent specified in the related Prospectus Supplement, in any one of the fifty states, the District of Columbia or any territories of the United States. To the extent specified in the related Prospectus Supplement, the Mortgage Loans will be secured by first mortgages or deeds of trust or other similar security instruments creating a first lien on Mortgaged Property. Multifamily Properties may include mixed commercial and residential structures and may include apartment buildings owned by private cooperative housing corporations ("COOPERATIVES"). The Mortgaged Properties may include leasehold interests in properties, the title to which is held by third party lessors. The Prospectus Supplement will specify whether the term of any such leasehold exceeds the term of the mortgage note by at least ten years. Each Mortgage Loan will have been originated by a person (the "ORIGINATOR") other than the Depositor. The related Prospectus Supplement will indicate if any Originator is an affiliate of the Depositor. The Mortgage Loans will be evidenced by promissory notes (the "MORTGAGE NOTES") secured by mortgages or deeds of trust (the "MORTGAGES") creating a lien on the Mortgaged Properties. Mortgage Loans will generally also be secured by an assignment of leases and rents and/or operating or other cash flow guarantees relating to the Mortgage Loan. LEASES To the extent specified in the related Prospectus Supplement, the Commercial Properties may be leased to Lessees that respectively occupy all or a portion of such properties. Pursuant to a Lease Assignment, the related Mortgagor may assign its rights, title and interest as lessor under each Lease and the income derived therefrom to the related mortgagee, while retaining a license to collect the rents for so long as there is no default. If the Mortgagor defaults, the license terminates and the mortgagee or its agent is entitled to collect the rents from the related Lessee or Lessees for application to the monetary obligations of the Mortgagor. State law may limit or restrict the enforcement of the Lease Assignments by a mortgagee until it takes possession of the related Mortgaged Property and/or a receiver is appointed. See "Certain Legal Aspects of the Mortgage Loans and the Leases -- Leases and Rents." Alternatively, - 19 - to the extent specified in the related Prospectus Supplement, the Mortgagor and the mortgagee may agree that payments under Leases are to be made directly to a Servicer. To the extent described in the related Prospectus Supplement, the Leases may require the Lessees to pay rent that is sufficient in the aggregate to cover all scheduled payments of principal and interest on the related Mortgage Loans and, in certain cases, their pro rata share of the operating expenses, insurance premiums and real estate taxes associated with the Mortgaged Properties. Certain of the Leases may require the Mortgagor to bear costs associated with structural repairs and/or the maintenance of the exterior or other portions of the Mortgaged Property or provide for certain limits on the aggregate amount of operating expenses, insurance premiums, taxes and other expenses that the Lessees are required to pay. If so specified in the related Prospectus Supplement, under certain circumstances the Lessees may be permitted to set off their rental obligations against the obligations of the Mortgagors under the Leases. In those cases where payments under the Leases (net of any operating expenses payable by the Mortgagors) are insufficient to pay all of the scheduled principal and interest on the related Mortgage Loans, the Mortgagors must rely on other income or sources (including security deposits) generated by the related Mortgaged Property to make payments on the related Mortgage Loan. To the extent specified in the related Prospectus Supplement, some Commercial Properties may be leased entirely to one Lessee. In such cases, absent the availability of other funds, the Mortgagor must rely entirely on rent paid by such Lessee in order for the Mortgagor to pay all of the scheduled principal and interest on the related Commercial Loan. To the extent specified in the related Prospectus Supplement, certain of the Leases may expire prior to the stated maturity of the related Mortgage Loan. In such cases, upon expiration of the Leases the Mortgagors will have to look to alternative sources of income, including rent payment by any new Lessees or proceeds from the sale or refinancing of the Mortgaged Property, to cover the payments of principal and interest due on such Mortgage Loans unless the Lease is renewed. As specified in the related Prospectus Supplement, certain of the Leases may provide that upon the occurrence of a casualty affecting a Mortgaged Property, the Lessee will have the right to terminate its Lease, unless the Mortgagor, as lessor, is able to cause the Mortgaged Property to be restored within a specified period of time. Certain Leases may provide that it is the lessor's responsibility, while other Leases provide that it is the Lessee's responsibility, to restore the Mortgaged Property after a casualty to its original condition. Certain Leases may provide a right of termination to the related Lessee if a taking of a material or specified percentage of the leased space in the Mortgaged Property occurs, or if the ingress or egress to the leased space has been materially impaired. DEFAULT AND LOSS CONSIDERATIONS WITH RESPECT TO THE MORTGAGE LOANS Mortgage loans secured by commercial and multifamily properties are markedly different from owner-occupied single family mortgage loans. The repayment of loans secured by commercial or multifamily properties is typically dependent upon the successful operation of such property rather than upon the liquidation value of the real estate. To the extent specified in the Prospectus Supplement, the Mortgage Loans will be non-recourse loans, which means that, absent special facts, the mortgagee may look only to the Net Operating Income from the property for repayment of the mortgage debt, and not to any other of the Mortgagor's assets, in the event of the Mortgagor's default. Lenders typically look to the Debt Service Coverage Ratio of a loan secured by income-producing property as an important measure of the risk of default on such a loan. The "DEBT SERVICE COVERAGE RATIO" of a Mortgage Loan at any given time is the ratio of the Net Operating Income for a twelve-month period to the annualized scheduled payments on the Mortgage Loan. "NET OPERATING INCOME" means, for any given period, to the extent specified in the related Prospectus Supplement, the total operating revenues derived from a Mortgaged Property during such period, minus the total operating expenses incurred in respect of such Mortgaged Property during such period other than (i) non-cash items such as depreciation and amortization, (ii) capital expenditures and (iii) debt service on loans secured by the Mortgaged Property. The Net Operating Income of a Mortgaged Property will fluctuate over time and may be sufficient or insufficient to cover debt service on the related Mortgage Loan at any given time. As the primary component of Net Operating Income, rental income (as well as maintenance payments from tenant-stockholders of a Cooperative) is subject to the vagaries of the applicable real estate market and/or business climate. Properties typically leased, occupied or used on a short-term basis, such as health care-related facilities, hotels and motels, and mini-warehouse and self-storage facilities, tend to be affected more rapidly by changes in market or business conditions than do properties leased, occupied or used for longer periods, such as (typically) retail centers, office buildings and industrial properties. Commercial Loans may be secured by owner-occupied Mortgaged Properties or Mortgaged Properties leased to a single tenant. Accordingly, a decline in the financial condition of the Mortgagor or single tenant, as applicable, may have a disproportionately greater effect on the Net Operating Income from such Mortgaged Properties than would be the case with respect to Mortgaged Properties with multiple tenants. Changes in the expense components of Net Operating Income due to the general economic climate or economic conditions in a locality or industry segment, such as increases in interest rates, real estate and personal property tax rates and other operating expenses, including energy costs; changes in governmental rules, regulations and fiscal policies, - 20 - including environmental legislation; and acts of God may also affect the risk of default on the related Mortgage Loan. As may be further described in the related Prospectus Supplement, in some cases leases of Mortgaged Properties may provide that the Lessee rather than the Mortgagor, is responsible for payment of some or all of these expenses; however, because leases are subject to default risks as well when a tenant's income is insufficient to cover its rent and operating expenses, the existence of such "net of expense" provisions will only temper, not eliminate, the impact of expense increases on the performance of the related Mortgage Loan. See "--Mortgage Loans -- Leases" above. While the duration of leases and the existence of any "net of expense" provisions are often viewed as the primary considerations in evaluating the credit risk of mortgage loans secured by certain income-producing properties, such risk may be affected equally or to a greater extent by changes in government regulation of the operator of the property. Examples of the latter include mortgage loans secured by health care-related facilities, the income from which and the operating expenses of which are subject to state and/or federal regulations, such as Medicare and Medicaid, and multifamily properties and mobile home parks, which may be subject to state or local rent control regulation and, in certain cases, restrictions on changes in use of the property. Low- and moderate-income housing in particular may be subject to legal limitations and regulations but, because of such regulations, may also be less sensitive to fluctuations in market rents generally. The Debt Service Coverage Ratio should not be relied upon as the sole measure of the risk of default of any loan, however, since other factors may outweigh a high Debt Service Coverage Ratio. With respect to a Balloon Mortgage Loan, for example, the risk of default as a result of the unavailability of a source of funds to finance the related balloon payment at maturity on terms comparable to or better than those of such Balloon Mortgage Loans could be significant even though the related Debt Service Coverage Ratio is high. The liquidation value of any Mortgaged Property may be adversely affected by risks generally incident to interests in real property, including declines in rental or occupancy rates. Lenders generally use the Loan-to-Value Ratio of a mortgage loan as a measure of risk of loss if a property must be liquidated upon a default by the Mortgagor. Appraised values of income-producing properties may be based on the market comparison method (recent resale value of comparable properties at the date of the appraisal), the cost replacement method (the cost of replacing the property at such date), the income capitalization method (a projection of value based upon the property's projected net cash flow), or upon a selection from or interpolation of the values derived from such methods. Each of these appraisal methods presents analytical challenges. It is often difficult to find truly comparable properties that have recently been sold; the replacement cost of a property may have little to do with its current market value; and income capitalization is inherently based on inexact projections of income and expense and the selection of an appropriate capitalization rate. Where more than one of these appraisal methods are used and create significantly different results, or where a high Loan-to-Value Ratio accompanies a high Debt Service Coverage Ratio (or vice versa), the analysis of default and loss risks is even more difficult. While the Depositor believes that the foregoing considerations are important factors that generally distinguish the Multifamily and Commercial Loans from single family mortgage loans and provide insight to the risks associated with income-producing real estate, there is no assurance that such factors will in fact have been considered by the Originators of the Multifamily and Commercial Loans, or that, for any of such Mortgage Loans, they are complete or relevant. See "Risk Factors -- Risks Associated with Mortgage Loans and Mortgaged Properties," " --Balloon Payments," " --Junior Mortgage Loans," " - --Obligor Default" and " --Mortgagor Type." LOAN-TO-VALUE RATIO The "LOAN-TO-VALUE RATIO" of a Mortgage Loan at any given time is the ratio (expressed as a percentage) of the then outstanding principal balance of the Mortgage Loan to the Value of the related Mortgaged Property. The "VALUE" of a Mortgaged Property, other than with respect to Refinance Loans, is generally the lesser of (a) the appraised value determined in an appraisal obtained by the originator at origination of such loan and (b) the sales price for such property. "REFINANCE LOANS" are loans made to refinance existing loans. To the extent set forth in the related Prospectus Supplement, the Value of the Mortgaged Property securing a Refinance Loan is the appraised value thereof determined in an appraisal obtained at the time of origination of the Refinance Loan. The Value of a Mortgaged Property as of the date of initial issuance of the related Series of Certificates may be less than the value at origination and will fluctuate from time to time based upon changes in economic conditions and the real estate market. - 21 - MORTGAGE LOAN INFORMATION IN PROSPECTUS SUPPLEMENTS Each Prospectus Supplement will contain information, as of the date of such Prospectus Supplement and to the extent then applicable and specifically known to the Depositor, with respect to the Mortgage Loans, including (i) the aggregate outstanding principal balance and the largest, smallest and average outstanding principal balance of the Mortgage Loans as of the applicable Cut-off Date, (ii) the type of property securing the Mortgage Loans (e.g., Multifamily Property or Commercial Property and the type of property in each such category), (iii) the weighted average (by principal balance) of the original and remaining terms to maturity of the Mortgage Loans, (iv) the earliest and latest origination date and maturity date of the Mortgage Loans, (v) the weighted average (by principal balance) of the Loan-to-Value Ratios at origination of the Mortgage Loans, (vi) the Mortgage Interest Rates or range of Mortgage Interest Rates and the weighted average Mortgage Interest Rate borne by the Mortgage Loans, (vii) the state or states in which most of the Mortgaged Properties are located, (viii) information with respect to the prepayment provisions, if any, of the Mortgage Loans, (ix) the weighted average Retained Interest, if any, (x) with respect to Mortgage Loans with floating Mortgage Interest Rates ("ARM LOANS"), the index, the frequency of the adjustment dates, the highest, lowest and weighted average note margin and pass-through margin, and the maximum Mortgage Interest Rate or monthly payment variation at the time of any adjustment thereof and over the life of the ARM Loan and the frequency of such monthly payment adjustments, (xi) the Debt Service Coverage Ratio either at origination or as of a more recent date (or both) and (xii) information regarding the payment characteristics of the Mortgage Loans, including without limitation balloon payment and other amortization provisions. The related Prospectus Supplement will also contain certain information available to the Depositor with respect to the provisions of leases and the nature of tenants of the Mortgaged Properties and other information referred to in a general manner under "--Mortgage Loans -- Default and Loss Considerations with Respect to the Mortgage Loans" above. If specific information respecting the Mortgage Loans is not known to the Depositor at the time Certificates are initially offered, more general information of the nature described above will be provided in the Prospectus Supplement, and specific information will be set forth in a report which will be available to purchasers of the related Certificates at or before the initial issuance thereof and will be filed as part of a Current Report on Form 8-K with the Securities and Exchange Commission within fifteen days after such initial issuance. PAYMENT PROVISIONS OF THE MORTGAGE LOANS To the extent specified in the related Prospectus Supplement, all of the Mortgage Loans will (i) have individual principal balances at origination of not less than $250,000, (ii) have original terms to maturity of not more than 40 years and (iii) provide for payments of principal, interest or both, on due dates that occur monthly, quarterly or semi-annually or at such other interval as is specified in the related Prospectus Supplement. Each Mortgage Loan may provide for no accrual of interest or for accrual of interest thereon at an interest rate (a "MORTGAGE INTEREST RATE") that is fixed over its term or that adjusts from time to time, or that is partially fixed and partially floating, or that may be converted from a floating to a fixed Mortgage Interest Rate, or from a fixed to a floating Mortgage Interest Rate, from time to time pursuant to an election or as otherwise specified on the related Mortgage Note, in each case as described in the related Prospectus Supplement. Each Mortgage Loan may provide for scheduled payments to maturity or payments that adjust from time to time to accommodate changes in the Mortgage Interest Rate or to reflect the occurrence of certain events, and may provide for negative amortization or accelerated amortization, in each case as described in the related Prospectus Supplement. Each Mortgage Loan may be fully amortizing or require a balloon payment due on its stated maturity date, in each case as described in the related Prospectus Supplement. Each Mortgage Loan may contain prohibitions on prepayment (a "LOCK-OUT PERIOD" and the date of expiration thereof, a "LOCK-OUT DATE") or require payment of a premium or a yield maintenance penalty (a "PREPAYMENT PREMIUM") in connection with a prepayment, in each case as described in the related Prospectus Supplement. In the event that holders of any class or classes of Offered Certificates will be entitled to all or a portion of any Prepayment Premiums collected in respect of Mortgage Loans, the related Prospectus Supplement will specify the method or methods by which any such amounts will be allocated. A Mortgage Loan may also contain provisions entitling the mortgagee to a share of profits realized from the operation or disposition of the Mortgaged Property ("EQUITY PARTICIPATIONS"), as described in the related Prospectus Supplement. In the event that holders of any class or classes of Offered Certificates will be entitled to all or a portion of an Equity Participation, the related Prospectus Supplement will specify the terms and provisions of the Equity Participation and the method or methods by which distributions in respect thereof will be allocated among such Certificates. CMBS Any CMBS will have been issued pursuant to a participation and servicing agreement, a pooling and servicing agreement, a trust agreement, an indenture or similar agreement (an "CMBS AGREEMENT"). A seller (the "CMBS ISSUER") and/or servicer (the "CMBS SERVICER") of the underlying Mortgage Loans (or Underlying CMBS) will have - 22 - entered into the CMBS Agreement with a trustee or a custodian under the CMBS Agreement (the "CMBS Trustee"), if any, or with the original purchaser of the interest in the underlying Mortgage Loans or CMBS evidenced by the CMBS. Distributions of any principal or interest, as applicable, will be made on CMBS on the dates specified in the related Prospectus Supplement. The CMBS may be issued in one or more classes with characteristics similar to the classes of Certificates described in this Prospectus. Any principal or interest distributions will be made on the CMBS by the CMBS Trustee or the CMBS Servicer. The CMBS Issuer or the CMBS Servicer or another person specified in the related Prospectus Supplement may have the right or obligation to repurchase or substitute assets underlying the CMBS after a certain date or under other circumstances specified in the related Prospectus Supplement. Enhancement in the form of reserve funds, subordination or other forms of credit support similar to that described for the Certificates under "Description of Credit Support" may be provided with respect to the CMBS. The type, characteristics and amount of such credit support, if any, will be a function of certain characteristics of the Mortgage Loans or Underlying CMBS evidenced by or securing such CMBS and other factors and generally will have been established for the CMBS on the basis of requirements of either any Rating Agency that may have assigned a rating to the CMBS or the initial purchasers of the CMBS. The Prospectus Supplement for a Series of Certificates evidencing interests in Mortgage Assets that include CMBS will specify, to the extent available, (i) the aggregate approximate initial and outstanding principal amount or notional amount, as applicable, and type of the CMBS to be included in the Trust Fund, (ii) the original and remaining term to stated maturity of the CMBS, if applicable, (iii) whether such CMBS is entitled only to interest payments, only to principal payments or to both, (iv) the pass-through or bond rate of the CMBS or formula for determining such rates, if any, (v) the applicable payment provisions for the CMBS, including, but not limited to, any priorities, payment schedules and subordination features, (vi) the CMBS Issuer, CMBS Servicer and CMBS Trustee, as applicable, (vii) certain characteristics of the credit support, if any, such as subordination, reserve funds, insurance policies, letters of credit or guarantees relating to the related Underlying Mortgage Loans, the Underlying CMBS or directly to such CMBS, (viii) the terms on which the related Underlying Mortgage Loans or Underlying CMBS for such CMBS or the CMBS may, or are required to, be purchased prior to their maturity, (ix) the terms on which Mortgage Loans or Underlying CMBS may be substituted for those originally underlying the CMBS, (x) the servicing fees payable under the CMBS Agreement, (xi) to the extent available to the Depositor, the type of information in respect of the Underlying Mortgage Loans described under "--Mortgage Loans -- Mortgage Loan Information in Prospectus Supplements" above, and the type of information in respect of the Underlying CMBS described in this paragraph, (xii) the characteristics of any cash flow agreements that are included as part of the trust fund evidenced or secured by the CMBS and (xiii) whether the CMBS is in certificated form, book-entry form or held through a depository such as The Depository Trust Company or the Participants Trust Company. ACCOUNTS Each Trust Fund will include one or more accounts established and maintained on behalf of the Certificateholders into which the person or persons designated in the related Prospectus Supplement will, to the extent described herein and in such Prospectus Supplement deposit all payments and collections received or advanced with respect to the Mortgage Assets and other assets in the Trust Fund. Such an account may be maintained as an interest bearing or a non-interest bearing account, and funds held therein may be held as cash or invested in certain short-term, investment grade obligations, in each case as described in the related Prospectus Supplement. See "Description of the Agreements -- Accounts -- Distribution Account" and "--Accounts -- Other Collection Accounts." CREDIT SUPPORT If so provided in the related Prospectus Supplement, partial or full protection against certain defaults and losses on the Trust Assets in the related Trust Fund may be provided to one or more classes of Certificates in the related Series in the form of subordination of one or more other classes of Certificates in such Series or by one or more other types of credit support, such as a letter of credit, insurance policy, guarantee, reserve fund or another type of credit support, or a combination thereof (any such coverage with respect to the Certificates of any Series, "CREDIT SUPPORT"). The amount and types of coverage, the identification of the entity providing the coverage (if applicable) and related information with respect to each type of Credit Support, if any, will be described in the Prospectus Supplement for a Series of Certificates. See "Risk Factors -- Credit Support Limitations" and "Description of Credit Support." - 23 - CASH FLOW AGREEMENTS If so provided in the related Prospectus Supplement, the Trust Fund may include guaranteed investment contracts pursuant to which moneys held in the funds and accounts established for the related Series will be invested at a specified rate. The Trust Fund may also include certain other agreements, such as interest rate exchange agreements, interest rate cap or floor agreements, currency exchange agreements or similar agreements provided to reduce the effects of interest rate or currency exchange rate fluctuations on the Mortgage Assets or on one or more classes of Certificates. The principal terms of any such guaranteed investment contract or other agreement (any such agreement, a "CASH FLOW AGREEMENT"), including, without limitation, provisions relating to the timing, manner and amount of payments thereunder and provisions relating to the termination thereof, will be described in the Prospectus Supplement for the related Series. In addition, the related Prospectus Supplement will provide certain information with respect to the obligor under any such Cash Flow Agreement. USE OF PROCEEDS The net proceeds to be received from the sale of the Certificates will be applied by the Depositor to the purchase of Trust Assets and to pay for certain expenses incurred in connection with such purchase of Trust Assets and sale of Certificates. The Depositor expects to sell the Certificates from time to time, but the timing and amount of offerings of Certificates will depend on a number of factors, including the volume of Mortgage Assets acquired by the Depositor, prevailing interest rates, availability of funds and general market conditions. YIELD CONSIDERATIONS GENERAL The yield on any Offered Certificate will depend on the price paid by the Certificateholder, the Pass-Through Rate of the Certificate, the receipt and timing of receipt of distributions on the Certificate and the weighted average life of the Mortgage Assets in the related Trust Fund (which may be affected by prepayments, defaults, liquidations or repurchases). See "Risk Factors." PASS-THROUGH RATE Certificates of any class within a Series may have fixed, variable or floating Pass-Through Rates, which may or may not be based upon the interest rates borne by the Mortgage Assets in the related Trust Fund. The Prospectus Supplement with respect to any Series of Certificates will specify the Pass-Through Rate for each class of such Certificates or, in the case of a variable or floating Pass-Through Rate, the method of determining the Pass-Through Rate; the effect, if any, of the prepayment of any Mortgage Asset on the Pass-Through Rate of one or more classes of Certificates; and whether the distributions of interest on the Certificates of any class will be dependent, in whole or in part, on the performance of any obligor under a Cash Flow Agreement. The effective yield to maturity to each holder of Certificates entitled to payments of interest will be below that otherwise produced by the applicable Pass-Through Rate and purchase price of such Certificate because, while interest may accrue on each Mortgage Asset during a certain period, the distribution of such interest will be made on a day which may be several days, weeks or months following the period of accrual. TIMING OF PAYMENT OF INTEREST Each payment of interest on the Certificates (or addition to the Certificate Balance of a class of Accrual Certificates) on a Distribution Date will include interest accrued during the Interest Accrual Period for such Distribution Date. As indicated above under "--Pass-Through Rate," if the Interest Accrual Period ends on a date other than a Distribution Date for the related Series, the yield realized by the holders of such Certificates may be lower than the yield that would result if the Interest Accrual Period ended on such Distribution Date. In addition, if so specified in the related Prospectus Supplement, interest accrued for an Interest Accrual Period for one or more classes of Certificates may be calculated on the assumption that distributions of principal (and additions to the Certificate Balance of Accrual Certificates) and allocations of losses on the Mortgage Assets may be made on the first day of the Interest Accrual Period for a Distribution Date and not on such Distribution Date. Such method would produce a lower effective yield than if interest were calculated on the basis of the actual principal amount outstanding during an Interest Accrual Period. The Interest Accrual Period for any class of Offered Certificates will be described in the related Prospectus Supplement. - 24 - PAYMENTS OF PRINCIPAL; PREPAYMENTS The yield to maturity on the Certificates will be affected by the rate of principal payments on the Mortgage Assets (including principal prepayments on Mortgage Loans resulting from voluntary prepayments by the Mortgagors, insurance proceeds, condemnations and involuntary liquidations). Such payments may be directly dependent upon the payments on Leases underlying such Mortgage Loans. The rate at which principal prepayments occur on the Mortgage Loans will be affected by a variety of factors, including, without limitation, the terms of the Mortgage Loans, the level of prevailing interest rates, the availability of mortgage credit and economic, demographic, geographic, tax, legal and other factors. In general, however, if prevailing interest rates fall significantly below the Mortgage Interest Rates on the Mortgage Loans comprising or underlying the Mortgage Assets in a particular Trust Fund, such Mortgage Loans are likely to be the subject of higher principal prepayments than if prevailing rates remain at or above the rates borne by such Mortgage Loans. In this regard, it should be noted that certain Mortgage Assets may consist of Mortgage Loans with different Mortgage Interest Rates and the stated pass-through or pay-through interest rate of certain CMBS may be a number of percentage points higher or lower than certain of the underlying Mortgage Loans. The rate of principal payments on some or all of the classes of Certificates of a Series will correspond to the rate of principal payments on the Mortgage Assets in the related Trust Fund and is likely to be affected by the existence of Lock-out Periods and Prepayment Premium provisions of the Mortgage Loans underlying or comprising such Mortgage Assets, and by the extent to which the servicer of any such Mortgage Loan is able to enforce such provisions. Mortgage Loans with a Lock-out Period or a Prepayment Premium provision, to the extent enforceable, generally would be expected to experience a lower rate of principal prepayments than otherwise identical Mortgage Loans without such provisions, with shorter Lock-out Periods or with lower Prepayment Premiums. If the purchaser of a Certificate offered at a discount calculates its anticipated yield to maturity based on an assumed rate of distributions of principal that is faster than that actually experienced on the Mortgage Assets, the actual yield to maturity will be lower than that so calculated. Conversely, if the purchaser of a Certificate offered at a premium calculates its anticipated yield to maturity based on an assumed rate of distributions of principal that is slower than that actually experienced on the Mortgage Assets, the actual yield to maturity will be lower than that so calculated. In either case, if so provided in the Prospectus Supplement for a Series of Certificates, the effect on yield on one or more classes of the Certificates of such Series of prepayments of the Mortgage Assets in the related Trust Fund may be mitigated or exacerbated by any provisions for sequential or selective distribution of principal to such classes. When a full prepayment is made on a Mortgage Loan, the Mortgagor is charged interest on the principal amount of the Mortgage Loan so prepaid for the number of days in the month actually elapsed up to the date of the prepayment. To the extent specified in the related Prospectus Supplement, the effect of prepayments in full will be to reduce the amount of interest paid in the following month to holders of Certificates entitled to payments of interest because interest on the principal amount of any Mortgage Loan so prepaid will be paid only to the date of prepayment rather than for a full month. To the extent specified in the related Prospectus Supplement, a partial prepayment of principal is applied so as to reduce the outstanding principal balance of the related Mortgage Loan as of the Due Date in the month in which such partial prepayment is received. As a result, to the extent specified in the related Prospectus Supplement, the effect of a partial prepayment on a Mortgage Loan will be to reduce the amount of interest passed through to holders of Certificates in the month following the receipt of such partial prepayment by an amount equal to one month's interest at the applicable Pass-Through Rate on the prepaid amount. The timing of changes in the rate of principal payments on the Mortgage Assets may significantly affect an investor's actual yield to maturity, even if the average rate of distributions of principal is consistent with an investor's expectation. In general, the earlier a principal payment is received on the Mortgage Assets and distributed on a Certificate, the greater the effect on such investor's yield to maturity. The effect on an investor's yield of principal payments occurring at a rate higher (or lower) than the rate anticipated by the investor during a given period may not be offset by a subsequent like decrease (or increase) in the rate of principal payments. PREPAYMENTS -- MATURITY AND WEIGHTED AVERAGE LIFE The rates at which principal payments are received on the Mortgage Assets included in or comprising a Trust Fund and the rate at which payments are made from any Credit Support or Cash Flow Agreement for the related Series of Certificates may affect the ultimate maturity and the weighted average life of each class of such Series. Prepayments on the Mortgage Loans comprising or underlying the Mortgage Assets in a particular Trust Fund will generally accelerate the rate at which principal is paid on some or all of the classes of the Certificates of the related Series. - 25 - If so provided in the Prospectus Supplement for a Series of Certificates, one or more classes of Certificates may have a final scheduled Distribution Date, which is the date on or prior to which the Certificate Balance thereof is scheduled to be reduced to zero, calculated on the basis of the assumptions applicable to such Series set forth therein. Weighted average life refers to the average amount of time that will elapse from the date of issue of a security until each dollar of principal of such security will be repaid to the investor. The weighted average life of a class of Certificates of a Series will be influenced by the rate at which principal on the Mortgage Loans comprising or underlying the Mortgage Assets is paid to such class, which may be in the form of scheduled amortization or prepayments (for this purpose, the term "prepayment" includes prepayments, in whole or in part, and liquidations due to default). In addition, the weighted average life of the Certificates may be affected by the varying maturities of the Mortgage Loans comprising or underlying the CMBS. If any Mortgage Loans comprising or underlying the Mortgage Assets in a particular Trust Fund have actual terms to maturity of less than those assumed in calculating final scheduled Distribution Dates for the classes of Certificates of the related Series, one or more classes of such Certificates may be fully paid prior to their respective final scheduled Distribution Dates, even in the absence of prepayments. Accordingly, the prepayment experience of the Mortgage Assets will, to some extent, be a function of the mix of Mortgage Interest Rates and maturities of the Mortgage Loans comprising or underlying such Mortgage Assets. See "Description of the Trust Funds." Prepayments on loans are also commonly measured relative to a prepayment standard or model, such as the Constant Prepayment Rate ("CPR") prepayment model. CPR represents a constant assumed rate of prepayment each month relative to the then outstanding principal balance of a pool of loans for the life of such loans. Neither CPR nor any other prepayment model or assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of loans, including the Mortgage Loans underlying or comprising the Mortgage Assets. Moreover, CPR was developed based upon historical prepayment experience for single family loans. Thus, it is likely that prepayment of any Mortgage Loans comprising or underlying the Mortgage Assets for any Series will not conform to any particular level of CPR. The Depositor is not aware of any meaningful publicly available prepayment statistics for multifamily or commercial mortgage loans. The Prospectus Supplement with respect to each Series of Certificates will contain tables, if applicable, setting forth the projected weighted average life of each class of Offered Certificates of such Series and the percentage of the initial Certificate Balance of each such class that would be outstanding on specified Distribution Dates based on the assumptions stated in such Prospectus Supplement, including assumptions that prepayments on the Mortgage Loans comprising or underlying the related Mortgage Assets are made at rates corresponding to various percentages of CPR or at such other rates specified in such Prospectus Supplement. Such tables and assumptions are intended to illustrate the sensitivity of weighted average life of the Certificates to various prepayment rates and will not be intended to predict or to provide information that will enable investors to predict the actual weighted average life of the Certificates. It is unlikely that prepayment of any Mortgage Loans comprising or underlying the Mortgage Assets for any Series will conform to any particular level of CPR or any other rate specified in the related Prospectus Supplement. OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE TYPE OF MORTGAGE ASSET A number of Mortgage Loans may have balloon payments due at maturity, and because the ability of a Mortgagor to make a balloon payment typically will depend upon its ability either to refinance the loan or to sell the related Mortgaged Property, there is a risk that a number of Mortgage Loans having balloon payments may default at maturity, or that the servicer may extend the maturity of such a Mortgage Loan in connection with a workout. In the case of defaults, recovery of proceeds may be delayed by, among other things, bankruptcy of the Mortgagor or adverse conditions in the market where the property is located. In order to minimize losses on defaulted Mortgage Loans, the servicer may, to the extent and under the circumstances set forth in the related Prospectus Supplement be permitted to modify Mortgage Loans that are in default or as to which a payment default is imminent. Any defaulted balloon payment or modification that extends the maturity of a Mortgage Loan will tend to extend the weighted average life of the Certificates, thereby lengthening the period of time elapsed from the date of issuance of a Certificate until it is retired. FORECLOSURES AND PAYMENT PLANS - 26 - The number of foreclosures and the principal amount of the Mortgage Loans comprising or underlying the Mortgage Assets that are foreclosed in relation to the number and principal amount of Mortgage Loans that are repaid in accordance with their terms will affect the weighted average life of the Mortgage Loans comprising or underlying the Mortgage Assets and that of the related Series of Certificates. Servicing decisions made with respect to the Mortgage Loans, including the use of payment plans prior to a demand for acceleration and the restructuring of Mortgage Loans in bankruptcy proceedings, may also have an effect upon the payment patterns of particular Mortgage Loans and thus the weighted average life of the Certificates. DUE-ON-SALE AND DUE-ON-ENCUMBRANCE CLAUSES Acceleration of mortgage payments as a result of certain transfers of or the creation of encumbrances upon underlying Mortgaged Property is another factor affecting prepayment rates that may not be reflected in the prepayment standards or models used in the relevant Prospectus Supplement. A number of the Mortgage Loans comprising or underlying the Mortgage Assets may include "due-on-sale" clauses or "due-on-encumbrance" clauses that allow the holder of the Mortgage Loans to demand payment in full of the remaining principal balance of the Mortgage Loans upon sale or certain other transfers of or the creation of encumbrances upon the related Mortgaged Property. With respect to any Whole Loans, to the extent provided in the related Prospectus Supplement, the Master Servicer or Primary Servicer, on behalf of the Trust Fund, will be required to exercise (or waive its right to exercise) any such right that the Trustee may have as mortgagee to accelerate payment of the Whole Loan in a manner consistent with the Servicing Standard. See "Certain Legal Aspects of the Mortgage Loans and the Leases -- Due-on-Sale and Due-on-Encumbrance" and "Description of the Agreements -- Due-on-Sale and Due-on-Encumbrance Provisions." SINGLE MORTGAGE LOAN OR SINGLE MORTGAGOR The Mortgage Assets in a particular Trust Fund may consist of a single Mortgage Loan or obligations of a single Mortgagor or related Mortgagors as specified in the related Prospectus Supplement. Assumptions used with respect to the prepayment standards or models based upon analysis of the behavior of mortgage loans in a larger group will not necessarily be relevant in determining prepayment experience on a single Mortgage Loan or with respect to a single Mortgagor. THE DEPOSITOR ICIFC Secured Assets Corp., the Depositor, is a wholly-owned subsidiary of ICI Funding Corporation and was incorporated in the State of California on May 6, 1996. The Depositor was organized for the purpose of serving as a private secondary mortgage market conduit. The Depositor does not have, nor is it expected in the future to have, any significant assets. The Depositor maintains its principal office at 20371 Irvine Avenue, Suite 200, Santa Ana Heights, California 92707. Its telephone number is (714) 556-0122. DESCRIPTION OF THE CERTIFICATES GENERAL The Certificates of each Series (including any class of Certificates not offered hereby) will represent the entire beneficial ownership interest in the Trust Fund created pursuant to the related Agreement. Each Series of Certificates will consist of one or more classes of Certificates that may (i) provide for the accrual of interest thereon based on fixed, variable or floating rates; (ii) be senior (collectively, "SENIOR CERTIFICATES") or subordinate (collectively, "SUBORDINATE CERTIFICATES") to one or more other classes of Certificates in respect of certain distributions on the Certificates; (iii) be entitled to principal distributions, with disproportionately low, nominal or no interest distributions (collectively, "STRIPPED PRINCIPAL CERTIFICATES"); (iv) be entitled to interest distributions, with disproportionately low, nominal or no principal distributions (collectively, "STRIPPED INTEREST CERTIFICATES"); (v) provide for distributions of accrued interest thereon commencing only following the occurrence of certain events, such as the retirement of one or more other classes of Certificates of such Series (collectively, "ACCRUAL CERTIFICATES"); (vi) provide for payments of principal sequentially, based on specified payment schedules, from only a portion of the Trust Assets in such Trust Fund or based on specified calculations, to the extent of available funds, in each case as described in the related Prospectus Supplement; and/or (vii) provide for distributions based on a combination of two or more components thereof with one - 27 - or more of the characteristics described in this paragraph including a Stripped Principal Certificate component and a Stripped Interest Certificate component. Any such classes may include classes of Offered Certificates. Each class of Offered Certificates of a Series will be issued in minimum denominations corresponding to the Certificate Balances or, in case of Stripped Interest Certificates, notional amounts or percentage interests specified in the related Prospectus Supplement. The transfer of any Offered Certificates may be registered and such Certificates may be exchanged without the payment of any service charge payable in connection with such registration of transfer or exchange, but the Depositor or the Trustee or any agent thereof may require payment of a sum sufficient to cover any tax or other governmental charge. One or more classes of Certificates of a Series may be issued in definitive form ("DEFINITIVE CERTIFICATES") or in book-entry form ("BOOK-ENTRY CERTIFICATES"), as provided in the related Prospectus Supplement. See "Risk Factors -- Book-Entry Registration" and "Description of the Certificates -- Book-Entry Registration and Definitive Certificates." Definitive Certificates will be exchangeable for other Certificates of the same class and Series of a like aggregate Certificate Balance, notional amount or percentage interest but of different authorized denominations. See "Risk Factors -- Limited Liquidity" and "--Limited Assets." DISTRIBUTIONS Distributions on the Certificates of each Series will be made by or on behalf of the Trustee on each Distribution Date as specified in the related Prospectus Supplement from the Available Distribution Amount for such Series and such Distribution Date. Except as otherwise specified in the related Prospectus Supplement, distributions (other than the final distribution) will be made to the persons in whose names the Certificates are registered at the close of business on the last business day of the month preceding the month in which the Distribution Date occurs (the "RECORD DATE"), and the amount of each distribution will be determined as of the close of business on the date specified in the related Prospectus Supplement (the "DETERMINATION DATE"). All distributions with respect to each class of Certificates on each Distribution Date will be allocated pro rata among the outstanding Certificates in such class or by random selection, as described in the related Prospectus Supplement or otherwise established by the related Trustee. Payments will be made either by wire transfer in immediately available funds to the account of a Certificateholder at a bank or other entity having appropriate facilities therefor, if such Certificateholder has so notified the Trustee or other person required to make such payments no later than the date specified in the related Prospectus Supplement (and, if so provided in the related Prospectus Supplement, holds Certificates in the requisite amount specified therein), or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register; PROVIDED, HOWEVER, that the final distribution in retirement of the Certificates (whether Definitive Certificates or Book-Entry Certificates) will be made only upon presentation and surrender of the Certificates at the location specified in the notice to Certificateholders of such final distribution. AVAILABLE DISTRIBUTION AMOUNT All distributions on the Certificates of each Series on each Distribution Date will be made from the Available Distribution Amount described below, in accordance with the terms described in the related Prospectus Supplement. Unless provided otherwise in the related Prospectus Supplement, the "AVAILABLE DISTRIBUTION AMOUNT" for each Distribution Date equals the sum of the following amounts: (i) the total amount of all cash on deposit in the related Distribution Account as of the corresponding Determination Date, including Servicer advances, net of any scheduled payments due and payable after such Distribution Date; (ii) interest or investment income on amounts on deposit in the Distribution Account, including any net amounts paid under any Cash Flow Agreements; and (iii) to the extent not on deposit in the related Distribution Account as of the corresponding Determination Date, any amounts collected under, from or in respect of any Credit Support with respect to such Distribution Date. As described below, the entire Available Distribution Amount will be distributed among the related Certificates (including any Certificates not offered hereby) on each Distribution Date, and accordingly will be released from the Trust Fund and will not be available for any future distributions. DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES Each class of Certificates (other than classes of Stripped Principal Certificates that have no Pass-Through Rate) may have a different Pass-Through Rate, which will be a fixed, variable or floating rate at which interest will accrue - 28 - on such class or a component thereof (the "PASS-THROUGH RATE"). The related Prospectus Supplement will specify the Pass-Through Rate for each class or component or, in the case of a variable or floating Pass-Through Rate, the method for determining the Pass-Through Rate. To the extent specified in the related Prospectus Supplement, interest on the Certificates will be calculated on the basis of a 360-day year consisting of twelve 30-day months. Distributions of interest in respect of the Certificates of any class will be made on each Distribution Date (other than any class of Accrual Certificates, which will be entitled to distributions of accrued interest commencing only on the Distribution Date, or under the circumstances, specified in the related Prospectus Supplement, and any class of Stripped Principal Certificates that are not entitled to any distributions of interest) based on the Accrued Certificate Interest for such class and such Distribution Date, subject to the sufficiency of the portion of the Available Distribution Amount allocable to such class on such Distribution Date. Prior to the time interest is distributable on any class of Accrual Certificates, the amount of Accrued Certificate Interest otherwise distributable on such class will be added to the Certificate Balance thereof on each Distribution Date. With respect to each class of Certificates and each Distribution Date (other than certain classes of Stripped Interest Certificates), "ACCRUED CERTIFICATE INTEREST" will be equal to interest accrued for a specified period on the outstanding Certificate Balance thereof immediately prior to the Distribution Date, at the applicable Pass-Through Rate, reduced as described below. To the extent provided in the Prospectus Supplement, Accrued Certificate Interest on Stripped Interest Certificates will be equal to interest accrued for a specified period on the outstanding notional amount thereof immediately prior to each Distribution Date, at the applicable Pass-Through Rate, reduced as described below. The method of determining the notional amount for any class of Stripped Interest Certificates will be described in the related Prospectus Supplement. Reference to notional amount is solely for convenience in certain calculations and does not represent the right to receive any distributions of principal. To the extent provided in the related Prospectus Supplement, the Accrued Certificate Interest on a Series of Certificates will be reduced in the event of prepayment interest shortfalls, which are shortfalls in collections of interest for a full accrual period resulting from prepayments prior to the due date in such accrual period on the Mortgage Loans comprising or underlying the Mortgage Assets in the Trust Fund for such Series. The particular manner in which such shortfalls are to be allocated among some or all of the classes of Certificates of that Series will be specified in the related Prospectus Supplement. The related Prospectus Supplement will also describe the extent to which the amount of Accrued Certificate Interest that is otherwise distributable on (or; in the case of Accrual Certificates, that may otherwise be added to the Certificate Balance of) a class of Offered Certificates may be reduced as a result of any other contingencies, including delinquencies, losses and deferred interest on or in respect of the Mortgage Loans comprising or underlying the Mortgage Assets in the related Trust Fund. To the extent provided in the related Prospectus Supplement, any reduction in the amount of Accrued Certificate Interest otherwise distributable on a class of Certificates by reason of the allocation to such class of a portion of any deferred interest on the Mortgage Loans comprising or underlying the Mortgage Assets in the related Trust Fund will result in a corresponding increase in the Certificate Balance of such class. See " Risk Factors -- Prepayments and Effect on Average Life of Certificates and Yields" and "Yield Considerations." DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES The Certificates of each Series, other than certain classes of Stripped Interest Certificates, will have a "CERTIFICATE BALANCE" which, at any time, will equal the then maximum amount that the holder will be entitled to receive in respect of principal out of the future cash flow on the Mortgage Assets and other assets included in the related Trust Fund. The outstanding Certificate Balance of a Certificate will be reduced to the extent of distributions of principal thereon from time to time and, if and to the extent so provided in the related Prospectus Supplement, by the amount of losses incurred in respect of the related Mortgage Assets, may be increased in respect of deferred interest on the related Mortgage Loans to the extent provided in the related Prospectus Supplement and, in the case of Accrual Certificates prior to the Distribution Date on which distributions of interest are required to commence, will be increased by any related Accrued Certificate Interest. Unless otherwise provided in the related Prospectus Supplement, the initial aggregate Certificate Balance of all classes of Certificates of a Series will not be greater than the outstanding aggregate principal balance of the related Mortgage Assets as of the applicable Cut-off Date. The initial aggregate Certificate Balance of a Series and each class thereof will be specified in the related Prospectus Supplement. To the extent provided in the related Prospectus Supplement, distributions of principal will be made on each Distribution Date to the class or classes of Certificates entitled thereto in accordance with the provisions described in such Prospectus Supplement until the Certificate Balance of such class has been reduced to zero. Stripped Interest Certificates with no Certificate Balance are not entitled to any distributions of principal. - 29 - COMPONENTS To the extent specified in the related Prospectus Supplement, distribution on a class of Certificates may be based on a combination of two or more different components as described under "--General" above. To such extent, the descriptions set forth under "--Distributions of Interests on the Certificates" and "--Distributions of Principal of the Certificates" above also relate to components of such a class of Certificates. In such case, reference in such sections to Certificate Balance and Pass-Through Rate refer to the principal balance, if any, of any such component and the Pass-Through Rate, if any, on any such component, respectively. DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF EQUITY PARTICIPATIONS If so provided in the related Prospectus Supplement, Prepayment Premiums or payments in respect of Equity Participations that are collected on the Mortgage Assets in the related Trust Fund will be distributed on each Distribution Date to the class or classes of Certificates entitled thereto in accordance with the provisions described in such Prospectus Supplement. ALLOCATION OF LOSSES AND SHORTFALLS If so provided in the Prospectus Supplement for a Series of Certificates consisting of one or more classes of Subordinate Certificates, on any Distribution Date in respect of which losses or shortfalls in collections on the Mortgage Assets have been incurred, the amount of such losses or shortfalls will be borne first by a class of Subordinate Certificates in the priority and manner and subject to the limitations specified in such Prospectus Supplement See "Description of Credit Support" for a description of the types of protection that may be included in shortfalls on Mortgage Assets comprising such Trust Fund. ADVANCES IN RESPECT OF DELINQUENCIES With respect to any Series of Certificates evidencing an interest in a Trust Fund, to the extent provided in the related Prospectus Supplement, a Servicer or another entity described therein will be required as part of its servicing responsibilities to advance on or before each Distribution Date its own funds or funds held in the Distribution Account that are not included in the Available Distribution Amount for such Distribution Date, in an amount equal to the aggregate of payments of principal (other than any balloon payments) and interest (net of related servicing fees and Retained Interest) that were due on the Whole Loans in such Trust Fund and were delinquent on the related Determination Date, subject to such Servicer's (or another entity's) good faith determination that such advances will be reimbursable from Related Proceeds (as defined below). In the case of a Series of Certificates that includes one or more classes of Subordinate Certificates and if so provided in the related Prospectus Supplement, each Servicer's (or another entity's) advance obligation may be limited only to the portion of such delinquencies necessary to make the required distributions on one or more classes of Senior Certificates and/or may be subject to such Servicer's (or another entity's) good faith determination that such advances will be reimbursable not only from Related Proceeds but also from collections on other Trust Assets otherwise distributable on one or more classes of such Subordinate Certificates. See "Description of Credit Support." Advances are intended to maintain a regular flow of scheduled interest and principal payments to holders of the class or classes of Certificates entitled thereto, rather than to guarantee or insure against losses. To the extent provided in the related Prospectus Supplement, advances of a Servicer's (or another entity's) funds will be reimbursable only out of related recoveries on the Mortgage Loans (including amounts received under any form of Credit Support) respecting which such advances were made (as to any Mortgage Loan, "RELATED PROCEEDS") and, if so provided in the Prospectus Supplement, out of any amounts otherwise distributable on one or more classes of Subordinate Certificates of such Series; PROVIDED, HOWEVER, that any such advance will be reimbursable from any amounts in the Distribution Account prior to any distributions being made on the Certificates to the extent that a Servicer (or such other entity) shall determine in good faith that such advance (a "NONRECOVERABLE ADVANCE") is not ultimately recoverable from Related Proceeds or, if applicable, from collections on other Trust Assets otherwise distributable on such Subordinate Certificates. If advances have been made by a Servicer from excess funds in the Distribution Account, such Servicer is required to replace such funds in the Distribution Account on any future Distribution Date to the extent that funds in the Distribution Account on such Distribution Date are less than payments required to be made to Certificateholders on such date. If so specified in the related Prospectus Supplement, the obligations of a Servicer (or another entity) to make advances may be secured by a cash advance reserve fund, a surety bond, a letter of credit or another form of limited guaranty. If applicable, information regarding the characteristics of, and the identity of any obligor on, any such surety bond, will be set forth in the related Prospectus Supplement. - 30 - If and to the extent so provided in the related Prospectus Supplement, a Servicer (or another entity) will be entitled to receive interest at the rate specified therein on its outstanding advances and will be entitled to pay itself such interest periodically from general collections on the Trust Assets prior to any payment to Certificateholders or as otherwise provided in the related Agreement and described in such Prospectus Supplement. The Prospectus Supplement for any Series of Certificates evidencing an interest in a Trust Fund that includes CMBS will describe any corresponding advancing obligation of any person in connection with such CMBS. REPORTS TO CERTIFICATEHOLDERS To the extent provided in the Prospectus Supplement, with each distribution to holders of any class of Certificates of a Series, the Master Servicer or the Trustee, as provided in the related Prospectus Supplement, will forward or cause to be forwarded to each such holder, to the Depositor and to such other parties as may be specified in the related Agreement, a statement setting forth, in each case to the extent applicable and available: (i) the amount of such distribution to holders of Certificates of such class applied to reduce the Certificate Balance thereof; (ii) the amount of such distribution to holders of Certificates of such class allocable to Accrued Certificate Interest; (iii) the amount of such distribution allocable to (a) Prepayment Premiums and (b) payments on account of Equity Participations; (iv) the amount of related servicing compensation received by each Servicer and such other customary information as any such Master Servicer or the Trustee deems necessary or desirable, or that a Certificateholder reasonably requests, to enable Certificateholders to prepare their tax returns; (v) the aggregate amount of advances included in such distribution, and the aggregate amount of any unreimbursed advances at the close of business on such Distribution Date; (vi) the aggregate principal balance of the Mortgage Assets at the close of business on such Distribution Date; (vii) the number and aggregate principal balance of Whole Loans in respect of which (a) one scheduled payment is delinquent, (b) two scheduled payments are delinquent, (c) three or more scheduled payments are delinquent and (d) foreclosure proceedings have been commenced; (viii) with respect to each Whole Loan that is delinquent two or more months, (a) the loan number thereof, (b) the unpaid balance thereof, (c) whether the delinquency is in respect of any balloon payment, (d) the aggregate amount of unreimbursed servicing expenses and unreimbursed advances in respect thereof, (e) if applicable, the aggregate amount of any interest accrued and payable on related servicing expenses and related advances assuming such Mortgage Loan is subsequently liquidated through foreclosure, (f) whether a notice of acceleration has been sent to the Mortgagor and, if so, the date of such notice, (g) whether foreclosure proceedings have been commenced and, if so, the date so commenced and (h) if such Mortgage Loan is more than three months delinquent and foreclosure has not been commenced, the reason therefor; (ix) with respect to any Whole Loan liquidated during the related Due Period (other than by payment in full), (a) the loan number thereof, (b) the manner in which it was liquidated and (c) the aggregate amount of liquidation proceeds received; (x) with respect to any Whole Loan liquidated during the related Due Period, (a) the portion of such liquidation proceeds payable or reimbursable to each Servicer (or any other entity) in respect of such Mortgage Loan and (b) the amount of any loss to Certificateholders; (xi) with respect to each REO Property relating to a Whole Loan and included in the Trust Fund as of the end of the related Due Period, (a) the loan number of the related Mortgage Loan and (b) the date of acquisition; (xii) with respect to each REO Property relating to a Whole Loan and included in the Trust Fund as of the end of the related Due Period, (a) the book value, (b) the principal balance of the related Mortgage Loan immediately - 31 - following such Distribution Date (calculated as if such Mortgage Loan were still outstanding taking into account certain limited modifications to the terms thereof specified in the Agreement), (c) the aggregate amount of unreimbursed servicing expenses and unreimbursed advances in respect thereof and (d) if applicable, the aggregate amount of interest accrued and payable on related servicing expenses and related advances; (xiii) with respect to any such REO Property sold during the related Due Period (a) the loan number of the related Mortgage Loan, (b) the aggregate amount of sale proceeds, (c) the portion of such sales proceeds payable or reimbursable to each Servicer in respect of such REO Property or the related Mortgage Loan and (d) the amount of any loss to Certificateholders in respect of the related Mortgage Loan; (xiv) the aggregate Certificate Balance or notional amount, as the case may be, of each class of Certificates (including any class of Certificates not offered hereby) at the close of business on such Distribution Date, separately identifying any reduction in such Certificate Balance due to the allocation of any loss and increase in the Certificate Balance of a class of Accrual Certificates in the event that Accrued Certificate Interest has been added to such balance; (xv) the aggregate amount of principal prepayments made during the related Due Period; (xvi) the aggregate Accrued Certificate Interest and unpaid Accrued Certificate Interest, if any, on each class of Certificates at the close of business on such Distribution Date; (xvii) in the case of Certificates with a variable Pass-Through Rate, the Pass-Through Rate applicable to such Distribution Date, and, if available, the immediately succeeding Distribution Date, as calculated in accordance with the method specified in the related Prospectus Supplement; (xviii) in the case of Certificates with a floating Pass-Through Rate, for statements to be distributed in any month in which an adjustment date occurs, the floating Pass-Through Rate applicable to such Distribution Date and the immediately succeeding Distribution Date as calculated in accordance with the method specified in the related Prospectus Supplement; (xix) as to any Series which includes Credit Support, the amount of coverage of each instrument of Credit Support included therein as of the close of business on such Distribution Date; and (xx) the aggregate amount of payments by the Mortgagors of (a) default interest, (b) late charges and (c) assumption and modification fees collected during the related Due Period. In the case of information furnished pursuant to subclauses (i)-(iv) above, the amounts shall be expressed as a dollar amount per minimum denomination of Certificates or for such other specified portion thereof. In addition, in the case of information furnished pursuant to subclauses (i), (ii), (xiv), (xvi) and (xvii) above, such amounts shall also be provided with respect to each component, if any, of a class of Certificates. The Master Servicer or the Trustee, as specified in the related Prospectus Supplement, will forward or cause to be forwarded to each holder of any class of Certificates, to the Depositor and to such other parties as may be specified in the Agreement, a copy of any statements or reports received by the Master Servicer or the Trustee, as applicable, with respect to any CMBS. The Prospectus Supplement for each Series of Offered Certificates will describe any additional information to be included in reports to the holders of such Certificates. Within a reasonable period of time after the end of each calendar year, the Master Servicer or the Trustee, as provided in the related Prospectus Supplement, shall furnish to each person who at any time during the calendar year was a holder of a Certificate a statement containing the information set forth in subclauses (i)-(iv) above, aggregated for such calendar year or the applicable portion thereof during which such person was a Certificateholder. Such obligation of the Master Servicer or the Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Master Servicer or the Trustee pursuant to any requirements of the Code as are from time to time in force. Unless and until Definitive Certificates are issued, or to the extent provided in the related Prospectus Supplement, such statements or reports will be forwarded by the Master Servicer or the Trustee to Cede. Such statements or reports may be available to Beneficial Owners upon request to DTC or their respective Participant or Indirect Participant. In addition, the Trustee shall furnish a copy of any such statement or report to any Beneficial Owner which requests such copy and certifies to the Trustee or the Master Servicer, as applicable, that it is the Beneficial Owner of a Certificate. See "--Book-Entry Registration and Definitive Certificates." - 32 - TERMINATION The obligations created by the Agreements for each Series of Certificates will terminate upon the payment to Certificateholders of that Series of all amounts held in the Distribution Account or by any Servicer, if any, or the Trustee and required to be paid to them pursuant to such Agreements following the earlier of (i) the final payment or other liquidation of the last Mortgage Asset subject thereto or the disposition of all property acquired upon foreclosure of any Whole Loan subject thereto and (ii) the purchase of all of the assets of the Trust Fund by the party entitled to effect such termination, under the circumstances and in the manner set forth in the related Prospectus Supplement. In no event, however, will the trust created by the Agreements continue beyond the date specified in the related Prospectus Supplement. Written notice of termination of the Agreements will be given to each Certificateholder, and the final distribution will be made only upon presentation and surrender of the Certificates at the location to be specified in the notice of termination. If so specified in the related Prospectus Supplement, a Series of Certificates may be subject to optional early termination through the repurchase of the assets in the related Trust Fund by the party specified therein, under the circumstances and in the manner set forth therein. If so provided in the related Prospectus Supplement, upon the reduction of the Certificate Balance of a specified class or classes of Certificates by a specified percentage or amount, the party specified therein will solicit bids for the purchase of all assets of the Trust Fund, or of a sufficient portion of such assets to retire such class or classes or purchase such class or classes at a price set forth in the related Prospectus Supplement, in each case, under the circumstances and in the manner set forth therein. In such an event, the applicable purchase price will be sufficient to pay the aggregate Certificate Balance and any undistributed shortfall in interest of such class or classes of Certificates. Further, in such an event, there will be no continuing direct or indirect liability of the related trust or Certificateholders as sellers of such assets in connection with any such sale. BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES If so provided in the related Prospectus Supplement, one or more classes of the Offered Certificates of any Series will be issued as Book-Entry Certificates, and each such class will be represented by one or more single Certificates registered in the name of a nominee for the depository, The Depository Trust Company ("DTC"). 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 Uniform Commercial Code ("UCC") and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participating organizations ("PARTICIPANTS") and facilitate the clearance and settlement of securities transactions between Participants through electronic book-entry changes in their accounts, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations. Indirect access to the DTC system also is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("INDIRECT PARTICIPANTS"). Unless otherwise provided in the related Prospectus Supplement, investors that are not Participants or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in Book- Entry Certificates may do so only through Participants and Indirect Participants. In addition, such investors ("BENEFICIAL OWNERS") will receive all distributions on the Book-Entry Certificates through DTC and its Participants. Under a book-entry format, Beneficial Owners will receive payments after the related Distribution Date because, while payments are required to be forwarded to Cede & Co., as nominee for DTC ("CEDE"), on each such date DTC will forward such payments to its Participants which thereafter will be required to forward them to Indirect Participants or Beneficial Owners. Unless otherwise provided in the related Prospectus Supplement, the only "Certificateholder" (as such term is used in the Agreements) will be Cede, as nominee of DTC, and the Beneficial Owners will not be recognized by the Trustee as Certificateholders under the Agreements. Beneficial Owners will be permitted to exercise the rights of Certificateholders under the related Agreements only indirectly through the Participants who in turn will exercise their rights through DTC. Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers among Participants on whose behalf it acts with respect to the Book-Entry Certificates and is required to receive and transmit distributions of principal of and interest on the Book-Entry Certificates. Participants and Indirect Participants with which Beneficial Owners have accounts with respect to the Book-Entry Certificates similarly are required to make book-entry transfers and receive and transmit such payments on behalf of their respective Beneficial Owners. - 33 - Because DTC can act only on behalf of Participants, who in turn act on behalf of Indirect Participants and certain banks, the ability of a Beneficial Owner to pledge its interest in the Book-Entry Certificates to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of its interest in the Book-Entry Certificates, may be limited due to the lack of a physical certificate evidencing such interest. DTC has advised the Depositor that it will take any action permitted to be taken by a Certificateholder under an Agreement only at the direction of one or more Participants to whose account with DTC interests in the Book-Entry Certificates are credited. Under DTC's procedures, DTC will take actions permitted to be taken by Holders of any class of Book-Entry Certificates under the Pooling and Servicing Agreement only at the direction of one or more Participants to whose account the Book-Entry Certificates are credited and whose aggregate holdings represent no less than any minimum amount of Voting Rights required therefor. Therefore, Beneficial Owners will only be able to exercise their Voting Rights to the extent permitted, and subject to the procedures established, by their Participant and/or Indirect Participant, as applicable. DTC may take conflicting actions with respect to any action of Certificateholders of any Class to the extent that Participants authorize such actions. None of the Servicers, the Depositor, the Trustee or any of their respective affiliates will have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Book-Entry Certificates, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Unless otherwise specified in the related Prospectus Supplement, Certificates initially issued in book-entry form will be issued in fully registered, certificated form to Beneficial Owners or their nominees ("DEFINITIVE CERTIFICATES"), rather than to DTC or its nominee only if (i) the Depositor advises the Trustee in writing that DTC is no longer willing or able to properly discharge its responsibilities as depository with respect to the Certificates and the Depositor is unable to locate a qualified successor or (ii) the Depositor, at its option, elects to terminate the book-entry system through DTC. Upon the occurrence of either of the events described in the immediately preceding paragraph, DTC is required to notify all Participants of the availability through DTC of Definitive Certificates for the Beneficial Owners. Upon surrender by DTC of the certificate or certificates representing the Book-Entry Certificates, together with instructions for re-registration, the Trustee will issue (or cause to be issued) to the Beneficial Owners identified in such instructions the Definitive Certificates to which they are entitled, and thereafter the Trustee will recognize the holders of such Definitive Certificates as Certificateholders under the Agreement. DESCRIPTION OF THE AGREEMENTS The Certificates of each Series evidencing interests in a Trust Fund including Whole Loans will be issued pursuant to a Pooling and Servicing Agreement among the Depositor, a Master Servicer, if specified in the related Prospectus Supplement, a Special Servicer and the Trustee. The Certificates of each Series evidencing interests in a Trust Fund not including Whole Loans will be issued pursuant to a Trust Agreement between the Depositor and a Trustee. The Master Servicer, any Special Servicer and the Trustee with respect to any Series of Certificates will be named in the related Prospectus Supplement. In lieu of appointing a Master Servicer, a servicer may be appointed pursuant to the Pooling and Servicing Agreement for any Trust Fund. The Mortgage Loans shall be serviced pursuant to the terms of the Pooling and Servicing Agreement and, to the extent specified in the related Prospectus Supplement, a Servicing Agreement among the Depositor (or an affiliate thereof), a Master Servicer, a Special Servicer and a Primary Servicer. A manager or administrator may be appointed pursuant to the Trust Agreement for any Trust Fund to administer such Trust Fund. The provisions of each Agreement will vary depending upon the nature of the Certificates to be issued thereunder and the nature of the related Trust Fund. A form of a Pooling and Servicing Agreement and a form of Servicing Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. Any Trust Agreement will generally conform to the form of Pooling and Servicing Agreement filed herewith, but will not contain provisions with respect to the servicing and maintenance of Whole Loans. The following summaries describe certain provisions that may appear in each Agreement. The Prospectus Supplement for a Series of Certificates will describe any provision of the Agreements relating to such Series that materially differs from the description thereof contained in this Prospectus. The summaries do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Agreements for each Trust Fund and the description of such provisions in the related Prospectus Supplement. As used herein with respect to any Series, the term "CERTIFICATE" refers to all of the Certificates of that Series, whether or not offered hereby and by the related Prospectus Supplement, unless the context otherwise requires. The Depositor will provide a copy of the Agreements (without exhibits) relating to any Series of Certificates without charge upon written request of a holder of a Certificate of such Series addressed to the Trustee specified in the related Prospectus Supplement. - 34 - To the extent specified in the related Prospectus Supplement, the Mortgage Loans included in each Trust Fund were being serviced prior to the issuance of the related Series of Certificates pursuant to the terms of a Servicing Agreement by the Master Servicer, the Special Servicer and/or a Primary Servicer. To the extent specified in the related Prospectus Supplement, following the issuance of the related Series of Certificates, such Mortgage Loans will continue to be serviced pursuant to such Servicing Agreement, together with the related Pooling and Servicing Agreement. Pursuant to the terms of each Servicing Agreement, a Primary Servicer or a Special Servicer will service the Mortgage Loans directly and a Master Servicer may monitor the activities of each Primary Servicer and Special Servicer. The Depositor shall assign its rights under each Servicing Agreement to the Trustee for the benefit of the Certificateholders. ASSIGNMENT OF ASSETS; REPURCHASES At the time of issuance of any Series of Certificates, the Depositor will assign (or cause to be assigned) to the designated Trustee the Trust Assets to be included in the related Trust Fund, together with all principal and interest to be received on or with respect to such Trust Assets after the Cut-off Date, other than principal and interest due on or before the Cut-off Date and other than any Retained Interest. The Trustee will, concurrently with such assignment, deliver the Certificates to the Depositor in exchange for the Trust Assets and the other assets comprising the Trust Fund for such Series. Each Mortgage Asset will be identified in a schedule appearing as an exhibit to the related Agreement. To the extent provided in the related Prospectus Supplement, such schedule will include detailed information (i) in respect of each Whole Loan included in the related Trust Fund, including without limitation, the address of the related Mortgaged Property and type of such property, the Mortgage Interest Rate and, if applicable, the applicable index, margin, adjustment date and any rate cap information, the original and remaining term to maturity, the original and outstanding principal balance and balloon payment, if any, the Value, Loan-to-Value Ratio and the Debt Service Coverage Ratio as of the date indicated and payment and prepayment provisions, if applicable, and (ii) in respect of each CMBS included in the related Trust Fund, including without limitation, the CMBS Issuer, CMBS Servicer and CMBS Trustee, the pass-through or bond rate or formula for determining such rate, the issue date and original and remaining term to maturity, if applicable, the original and outstanding principal amount and payment provisions, if applicable. With respect to each Whole Loan, the Depositor will deliver or cause to be delivered to the Trustee (or to the custodian hereinafter referred to) certain loan documents, which to the extent specified in the related Prospectus Supplement will include the original Mortgage Note endorsed, without recourse, in blank or to the order of the Trustee, the original Mortgage (or a certified copy thereof) with evidence of recording indicated thereon and an assignment of the Mortgage to the Trustee in recordable form. Notwithstanding the foregoing, a Trust Fund may include Mortgage Loans where the original Mortgage Note is not delivered to the Trustee if the Company delivers to the Trustee or the custodian a copy or a duplicate original of the Mortgage Note, together with an affidavit certifying that the original thereof has been lost or destroyed. With respect to such Mortgage Loans, the Trustee (or its nominee) may not be able to enforce the Mortgage Note against the related borrower. To the extent provided in the related Prospectus Supplement, the related Agreements will require that the Depositor or another party specified therein promptly cause each such assignment of Mortgage to be recorded in the appropriate public office for real property records, except in states where, in the opinion of counsel acceptable to the Trustee, such recording is not required to protect the Trustee's interest in the related Whole Loan against the claim of any subsequent transferee or any successor to or creditor of the Depositor, the Master Servicer, the relevant Asset Seller or any other prior holder of the Whole Loan. The Trustee (or a custodian) will review such Whole Loan documents within a specified period of days after receipt thereof, and the Trustee (or a custodian) will hold such documents in trust for the benefit of the Certificateholders. To the extent specified in the related Prospectus Supplement, if any such document is found to be missing or defective in any material respect, the Trustee (or such custodian) shall immediately notify the Depositor. If the Depositor cannot cure the omission or defect within a specified number of days after receipt of such notice, then to the extent specified in the related Prospectus Supplement, the Depositor will be obligated, within a specified number of days of receipt of such notice, to repurchase the related Whole Loan from the Trustee at the Purchase Price or substitute for such Mortgage Loan. To the extent specified in the related Prospectus Supplement, this repurchase or substitution obligation constitutes the sole remedy available to the Certificateholders or the Trustee for omission of, or a material defect in, a constituent document. To the extent specified in the related Prospectus Supplement, in lieu of curing any omission or defect in the Mortgage Asset or repurchasing or substituting for such Mortgage Asset, the Depositor may agree to cover any losses suffered by the Trust Fund as a result of such breach or defect. If so provided in the related Prospectus Supplement, the Depositor will, as to some or all of the Mortgage Loans, assign or cause to be assigned to the Trustee the related Lease Assignments. In certain cases, the Trustee, or Primary Servicer, as applicable, may collect all moneys under the related Leases and distribute amounts, if any, required under the Lease for the payment of maintenance, insurance and taxes, to the extent specified in the related Lease - 35 - agreement. The Trustee, or if so specified in the Prospectus Supplement, the Master Servicer, as agent for the Trustee, may hold the Lease in trust for the benefit of the Certificateholders. With respect to each CMBS in certificated form, the Depositor will deliver or cause to be delivered to the Trustee (or the custodian) the original certificate or other definitive evidence of such CMBS together with bond power or other instruments, certifications or documents required to transfer fully such CMBS to the Trustee for the benefit of the Certificateholders. With respect to each CMBS in uncertificated or book-entry form or held through a "clearing corporation" within the meaning of the UCC the Depositor and the Trustee will cause such CMBS to be registered directly or on the books of such clearing corporation or of a financial intermediary in the name of the Trustee for the benefit of the Certificateholders. To the extent provided in the related Prospectus Supplement, the related Agreement will require that either the Depositor or the Trustee promptly cause any CMBS in certificated form not registered in the name of the Trustee to be re-registered, with the applicable persons, in the name of the Trustee. REPRESENTATIONS AND WARRANTIES; REPURCHASES To the extent provided in the related Prospectus Supplement the Depositor will, with respect to each Whole Loan, make or assign representations and warranties, as of a specified date (the person making such representations and warranties, the "WARRANTING PARTY") covering, by way of example, the following types of matters: (i) the accuracy of the information set forth for such Whole Loan on the schedule of Mortgage Assets appearing as an exhibit to the related Agreement; (ii) the existence of title insurance insuring the lien priority of the Whole Loan; (iii) the authority of the Warranting Party to sell the Whole Loan; (iv) the payment status of the Whole Loan and the status of payments of taxes, assessments and other charges affecting the related Mortgaged Property; (v) the existence of customary provisions in the related Mortgage Note and Mortgage to permit realization against the Mortgaged Property of the benefit of the security of the Mortgage; and (vi) the existence of hazard and extended perils insurance coverage on the Mortgaged Property. Any Warranting Party, if other than the Depositor, shall be an Asset Seller or an affiliate thereof or such other person acceptable to the Depositor and shall be identified in the related Prospectus Supplement. Representations and warranties made in respect of a Whole Loan may have been made as of a date prior to the applicable Cut-off Date. A substantial period of time may have elapsed between such date and the date of initial issuance of the related Series of Certificates evidencing an interest in such Whole Loan. To the extent specified in the related Prospectus Supplement, in the event of a breach of any such representation or warranty, the Warranting Party will be obligated to reimburse the Trust Fund for losses caused by any such breach or either cure such breach or repurchase or replace the affected Whole Loan as described below. Since the representations and warranties may not address events that may occur following the date as of which they were made, the Warranting Party will have a reimbursement, cure, repurchase or substitution obligation in connection with a breach of such a representation and warranty only if the relevant event that causes such breach occurs prior to such date. Such party would have no such obligations if the relevant event that causes such breach occurs after such date. To the extent provided in the related Prospectus Supplement, the Agreements will provide that the Master Servicer and/or Trustee will be required to notify promptly the relevant Warranting Party of any breach of any representation or warranty made by it in respect of a Whole Loan that materially and adversely affects the value of such Whole Loan or the interests therein of the Certificateholders. If such Warranting Party cannot cure such breach within a specified period following the date on which such party was notified of such breach, then such Warranting Party will be obligated to repurchase such Whole Loan from the Trustee within a specified period from the date on which the Warranting Party was notified of such breach, at the Purchase Price therefor. As to any Whole Loan, unless otherwise specified in the related Prospectus Supplement, the "PURCHASE PRICE" is equal to the sum of the unpaid principal balance thereof, plus unpaid accrued interest thereon at the Mortgage Interest Rate from the date as to which interest was last paid to the due date in the Due Period in which the relevant purchase is to occur, plus certain servicing expenses that are reimbursable to each Servicer. If so provided in the Prospectus Supplement for a Series, a Warranting Party, rather than repurchase a Whole Loan as to which a breach has occurred, will have the option, within a specified period after initial issuance of such Series of Certificates, to cause the removal of such Whole Loan from the Trust Fund and substitute in its place one or more other Whole Loans, in accordance with the standards described in the related Prospectus Supplement. If so provided in the Prospectus Supplement for a Series, a Warranting Party, rather than repurchase or substitute a Whole Loan as to which a breach has occurred, will have the option to reimburse the Trust Fund or the Certificateholders for any losses caused by such breach. To the extent specified in the related Prospectus Supplement, this reimbursement, repurchase or substitution obligation will constitute the sole remedy available to holders of Certificates or the Trustee for a breach of representation by a Warranting Party. - 36 - Neither the Depositor (except to the extent that it is the Warranting Party) nor any Servicer will be obligated to purchase or substitute for a Whole Loan if a Warranting Party defaults on its obligation to do so, and no assurance can be given that Warranting Parties will carry out such obligations with respect to Whole Loans. To the extent provided in the related Prospectus Supplement the Warranting Party will, with respect to a Trust Fund that includes CMBS, make or assign certain representations or warranties, as of a specified date, with respect to such CMBS, covering (i) the accuracy of the information set forth therefor on the schedule of Mortgage Assets appearing as an exhibit to the related Agreement and (ii) the authority of the Warranting Party to sell such Mortgage Assets. The related Prospectus Supplement will describe the remedies for a breach thereof. Each Servicer will make certain representations and warranties regarding its authority to enter into, and its ability to perform its obligations under, the related Agreement. A breach of any such representation in a Pooling and Servicing Agreement of a Master Servicer or Special Servicer which materially and adversely affects the interests of the Certificateholders and which continues unremedied for thirty days after the giving of written notice of such breach to such Servicer by the Trustee or the Depositor, or to such Servicer, the Depositor and the Trustee by the holders of Certificates evidencing not less than 25% of the Voting Rights (unless otherwise specified in the related Prospectus Supplement), will constitute an Event of Default under such Pooling and Servicing Agreement. A breach of any such representation in a Servicing Agreement of a Servicer which continues unremedied for thirty days after giving notice of such breach to such Servicer will constitute an Event of Default under such Servicing Agreement. See "Events of Default" and "Rights Upon Event of Default." ACCOUNTS GENERAL Each Servicer and/or the Trustee will, as to each Trust Fund, establish and maintain or cause to be established and maintained one or more separate accounts for the collection of payments on the related Mortgage Assets (collectively, the "ACCOUNTS"), which must be either (i) an account or accounts the deposits in which are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC") (to the limits established by the FDIC) and the uninsured deposits in which are otherwise secured such that the Certificateholders have a claim with respect to the funds an Account or a perfected first priority security interest against any collateral securing such funds that is superior to the claims of any other depositors or general creditors of the institution with which such Account is maintained or (ii) otherwise maintained with a bank or trust company, and in a manner, satisfactory to the Rating Agency or Agencies rating any class of Certificates of such Series. The collateral eligible to secure amounts in an Account is limited to United States government securities and other investment grade obligations specified in the Agreement ("PERMITTED INVESTMENTS"). An Account may be maintained as an interest bearing or a non-interest bearing account and the funds held therein may be invested pending each succeeding Distribution Date in certain short-term Permitted Investments. To the extent provided in the related Prospectus Supplement, any interest or other income earned on funds in an Account will be paid to a Servicer or its designee as additional servicing compensation. An Account may be maintained with an institution that is an affiliate of a Servicer provided that such institution meets the standards imposed by the Rating Agency or Agencies. If permitted by the Rating Agency or Agencies and so specified in the related Prospectus Supplement, an Account may contain funds relating to more than one Series of mortgage pass-through certificates and may contain other funds respecting payments on mortgage loans belonging to a Servicer or serviced or master serviced by it on behalf of others. DEPOSITS To the extent provided in the related Prospectus Supplement, the Primary Servicer will deposit or cause to be deposited in an Account on a daily basis, to the extent provided in the related Agreement, the following payments and collections received, or advances made, by the Primary Servicer: (i) all payments on account of principal, including principal prepayments, on the Mortgage Assets; (ii) all payments on account of interest on the Mortgage Assets, including any default interest collected, in each case net of any portion thereof retained by a Servicer as its servicing compensation; (iii) all proceeds of the hazard, business interruption and general liability insurance policies to be maintained in respect of each Mortgaged Property securing a Whole Loan in the Trust Fund (to the extent such proceeds are not applied to the restoration of the property or released to the Mortgagor in accordance with the normal servicing procedures of a Servicer, subject to the terms and conditions of the related Mortgage and Mortgage Note) and all - 37 - proceeds of rental interruption policies, if any, insuring against losses arising from the failure of Lessees under a Lease to make timely rental payments because of certain casualty events (collectively, "INSURANCE PROCEEDS") and all other amounts received and retained in connection with the liquidation of defaulted Mortgage Loans in the Trust Fund, by foreclosure, condemnation or otherwise ("LIQUIDATION PROCEEDS"), together with the net proceeds on a monthly basis with respect to any Mortgaged Properties acquired for the benefit of Certificateholders by foreclosure or by deed in lieu of foreclosure or otherwise; (iv) any advances made as described under "Description of the Certificates -- Advances in Respect of Delinquencies"; (v) any amounts representing Prepayment Premiums; (vi) any amounts received from a Special Servicer; but excluding any REO Proceeds and penalties or modification fees which may be retained by the Primary Servicer. REO Proceeds shall be maintained in an Account by the Special Servicer. Once a month the Primary Servicer and the Special Servicer remit funds on deposit in the Account each maintains together with any P&I Advances to the Master Servicer for deposit in an Account maintained by the Master Servicer. WITHDRAWALS A Servicer may, from time to time, to the extent provided in the related Agreement and described in the related Prospectus Supplement, make withdrawals from an Account for each Trust Fund for any of the following purposes: (i) to reimburse a Servicer for unreimbursed amounts advanced as described under "Description of the Certificates -- Advances in Respect of Delinquencies," such reimbursement to be made out of amounts received which were identified and applied by such Servicer as late collections of interest on and principal of the particular Whole Loans with respect to which the advances were made; (ii) to reimburse a Servicer for unpaid servicing fees earned and certain unreimbursed servicing expenses incurred with respect to Whole Loans and properties acquired in respect thereof, such reimbursement to be made out of amounts that represent Liquidation Proceeds and Insurance Proceeds collected on the particular Whole Loans and properties, and net income collected on the particular properties, with respect to which such fees were earned or such expenses were incurred; (iii) to reimburse a Servicer for any advances described in clause (i) above and any servicing expenses described in clause (ii) above which, in the Master Servicer's good faith judgment, will not be recoverable from the amounts described in clauses (i) and (ii), respectively, such reimbursement to be made from amounts collected on other Trust Assets or, if and to the extent so provided by the related Agreement and described in the related Prospectus Supplement, just from that portion of amounts collected on other Trust Assets that is otherwise distributable on one or more classes of Subordinate Certificates, if any, remain outstanding, and otherwise any outstanding class of Certificates, of the related Series; (iv) if and to the extent described in the related Prospectus Supplement, to pay a Servicer interest accrued on the advances described in clause (i) above and the servicing expenses described in clause (ii) above while such remain outstanding and unreimbursed; (v) to the extent provided in the related Prospectus Supplement, to pay a Servicer, as additional servicing compensation, interest and investment income earned in respect of amounts held in the Account; and (vi) to make any other withdrawals permitted by the related Agreement and described in the related Prospectus Supplement. If and to the extent specified in the Prospectus Supplement amounts may be withdrawn from any Account to cover additional costs, expenses or liabilities associated with: the preparation of environmental site assessments with respect to, and for containment, clean-up or remediation of hazardous wastes and materials, the proper operation, management and maintenance of any Mortgaged Property acquired for the benefit of Certificateholders by foreclosure or by deed in lieu of foreclosure or otherwise, such payments to be made out of income received on such property; if one or more - 38 - elections have been made to treat the Trust Fund or designated portions thereof as a REMIC, any federal, state or local taxes imposed on the Trust Fund or its assets or transactions, as and to the extent described under "Federal Income Tax Consequences -- REMIC -- Prohibited Transactions and Other Taxes"; retaining an independent appraiser or other expert in real estate matters to determine a fair sale price for a defaulted Whole Loan or a property acquired in respect thereof in connection with the liquidation of such Whole Loan or property; and obtaining various opinions of counsel pursuant to the related Agreement for the benefit of Certificateholders. DISTRIBUTION ACCOUNT To the extent specified in the related Prospectus Supplement, the Trustee will, as to each Trust Fund, establish and maintain, or cause to be established and maintained, one or more separate Accounts for the collection of payments from the Master Servicer immediately preceding each Distribution Date (the "DISTRIBUTION ACCOUNT"). The Trustee will also deposit or cause to be deposited in a Distribution Account the following amounts: (i) any amounts paid under any instrument or drawn from any fund that constitutes Credit Support for the related Series of Certificates as described under "Description of Credit Support"; (ii) any amounts paid under any Cash Flow Agreement, as described under "Description of the Trust Funds --Cash Flow Agreements"; (iii) all proceeds of any Trust Asset or, with respect to a Whole Loan, property acquired in respect thereof purchased by the Depositor, any Asset Seller or any other specified person, and all proceeds of any Mortgage Asset purchased as described under "Description of the Certificates -- Termination" (also, Liquidation Proceeds); and (iv) any other amounts required to be deposited in the Distribution Account as provided in the related Agreement and described in the related Prospectus Supplement. The Trustee may, from time to time, to the extent provided in the related Agreements and described in the related Prospectus Supplement, make a withdrawal from a Distribution Account to make distributions to the Certificateholders on each Distribution Date. OTHER COLLECTION ACCOUNTS Notwithstanding the foregoing, if so specified in the related Prospectus Supplement, the Agreement for any Series of Certificates may provide for the establishment and maintenance of a separate collection account into which the Master Servicer or any related Primary Servicer or Special Servicer will deposit on a daily basis the amounts described under "--Accounts -- Deposits" above for one or more Series of Certificates. Any amounts on deposit in any such collection account will be withdrawn therefrom and deposited into the appropriate Distribution Account by a time specified in the related Prospectus Supplement. To the extent specified in the related Prospectus Supplement, any amounts which could be withdrawn from the Distribution Account as described under "--Accounts --Withdrawals" above, may also be withdrawn from any such collection account. The Prospectus Supplement will set forth any restrictions with respect to any such collection account, including investment restrictions and any restrictions with respect to financial institutions with which any such collection account may be maintained. COLLECTION AND OTHER SERVICING PROCEDURES PRIMARY SERVICER The Primary Servicer is required under each Servicing Agreement to make reasonable efforts to collect all scheduled payments under the Mortgage Loans and will follow or cause to be followed such collection procedures as it would follow with respect to mortgage loans that are comparable to the Mortgage Loans and held for its own account, provided such procedures are consistent with (i) the terms of the related Servicing Agreement, (ii) applicable law and (iii) the general servicing standard specified in the related Prospectus Supplement or, if no such standard is so specified, its normal servicing practices (in either case, the "SERVICING STANDARD"). Each Primary Servicer will also be required to perform other customary functions of a servicer of comparable loans, including maintaining (or causing the Mortgagor or Lessee on each Mortgage or Lease to maintain) hazard, business interruption and general liability insurance policies (and, if applicable, rental interruption policies) as described herein and in any related Prospectus Supplement, and filing and settling claims thereunder; maintaining escrow or impoundment accounts of Mortgagors for payment of taxes, insurance and other items required to be paid by any - 39 - Mortgagor pursuant to the Mortgage Loan; processing assumptions or substitutions in those cases where the Primary Servicer has determined not to enforce any applicable due-on-sale clause; attempting to cure delinquencies; supervising foreclosures; inspecting and managing Mortgaged Properties under certain circumstances; and maintaining accounting records relating to the Mortgage Loans. MASTER SERVICER The Master Servicer shall monitor the actions of the Primary Servicer and the Special Servicer to confirm compliance with the Agreements. To the extent specified in the related Prospectus Supplement, a Master Servicer, as servicer of the Mortgage Loans, on behalf of itself, the Trustee and the Certificateholders, will present claims to the obligor under each instrument of Credit Support, and will take such reasonable steps as are necessary to receive payment or to permit recovery thereunder with respect to defaulted Mortgage Loans. See "Description of Credit Support." If a Master Servicer or its designee recovers payments under any instrument of Credit Support with respect to any defaulted Mortgage Loan, the Master Servicer will be entitled to withdraw or cause to be withdrawn from the Distribution Account out of such proceeds, prior to distribution thereof to Certificateholders, amounts representing its normal servicing compensation on such Mortgage Loan, unreimbursed servicing expenses incurred with respect to the Mortgage Loan and any unreimbursed advances of delinquent payments made with respect to the Mortgage Loan. See "--Hazard Insurance Policies" and "Description of Credit Support." SPECIAL SERVICER A Mortgagor's failure to make required payments may reflect inadequate income or the diversion of that income from the service of payments due under the Mortgage Loan, and may call into question such Mortgagor's ability to make timely payment of taxes and to pay for necessary maintenance of the related Mortgaged Property. To the extent provided in the related Prospectus Supplement, upon the occurrence of any of the following events (each a "SERVICING TRANSFER EVENT") with respect to a Mortgage Loan, servicing for such Mortgage Loan (thereafter, a "SPECIALLY SERVICED MORTGAGE LOAN") will be transferred from the Primary Servicer to the Special Servicer: (a) such Mortgage Loan becomes a defaulted Mortgage Loan, (b) the occurrence of certain events indicating the possible insolvency of the Mortgagor, (c) the receipt by the Primary Servicer of a notice of foreclosure of any other lien on the related Mortgaged Property, (d) the Master Servicer or the Primary Servicer determines that a payment default is imminent, (e) with respect to a Balloon Mortgage Loan, no assurances have been given as to the ability of the Mortgagor to make the final payment thereon, or (f) the occurrence of certain other events constituting defaults under the terms of such Mortgage Loan. The Special Servicer is required to monitor any Mortgage Loan which is in default, contact the Mortgagor concerning the default, evaluate whether the causes of the default can be cured over a reasonable period without significant impairment of the value of the Mortgaged Property, initiate corrective action in cooperation with the Mortgagor if cure is likely, inspect the Mortgaged Property and take such other actions as are consistent with the Servicing Standard. A significant period of time may elapse before the Special Servicer is able to assess the success of such corrective action or the need for additional initiatives. The time within which the Special Servicer makes the initial determination of appropriate action evaluates the success of corrective action, develops additional initiatives, institutes foreclosure proceedings and actually forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure) on behalf of the Certificateholders, may vary considerably depending on the particular Mortgage Loan, the Mortgaged Property, the Mortgagor, the presence of an acceptable party to assume the Mortgage Loan and the laws of the jurisdiction in which the Mortgaged Property is located. Under federal bankruptcy law, the Special Servicer in certain cases may not be permitted to accelerate a Mortgage Loan or to foreclose on a Mortgaged Property for a considerable period of time. See "Certain Legal Aspects of the Mortgage Loans and the Leases." - 40 - Any Agreement relating to a Trust Fund that includes Mortgage Loans may grant to the Master Servicer and/or the holder or holders of certain classes of Certificates a right of first refusal to purchase from the Trust Fund at a predetermined purchase price any such Mortgage Loan as to which a specified number of scheduled payments thereunder are delinquent. Any such right granted to the holder of an Offered Certificate will be described in the related Prospectus Supplement. The related Prospectus Supplement will also describe any such right granted to any person if the predetermined purchase price is less than the Purchase Price described under "--Representations and Warranties; Repurchases." The Special Servicer may agree to modify, waive or amend any term of any Specially Serviced Mortgage Loan in a manner consistent with the Servicing Standard so long as the modification, waiver or amendment will not (i) affect the amount or timing of any scheduled payments of principal or interest on the Mortgage Loan or (ii) in its judgment, materially impair the security for the Mortgage Loan or reduce the likelihood of timely payment of amounts due thereon. The Special Servicer also may agree to any modification, waiver or amendment that would so affect or impair the payments on, or the security for, a Mortgage Loan if, unless otherwise provided in the related Prospectus Supplement, (i) in its judgment, a material default on the Mortgage Loan has occurred or a payment default is imminent and (ii) in its judgment, such modification, waiver or amendment is reasonably likely to produce a greater recovery with respect to the Mortgage Loan on a present value basis than would liquidation. The Special Servicer is required to notify the Trustee in the event of any modification, waiver or amendment of any Mortgage Loan. The Special Servicer, on behalf of the Trustee, may at any time institute foreclosure proceedings, exercise any power of sale contained in any mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire title to a Mortgaged Property securing a Mortgage Loan by operation of law or otherwise, if such action is consistent with the Servicing Standard and a default on such Mortgage Loan has occurred or, in the Special Servicer's judgment, is imminent. Unless otherwise specified in the related Prospectus Supplement, the Special Servicer may not acquire title to any related Mortgaged Property or take any other action that would cause the Trustee, for the benefit of Certificateholders, or any other specified person to be considered to hold title to, to be a "mortgagee-in-possession" of, or to be an "owner" or an "operator" of such Mortgaged Property within the meaning of certain federal environmental laws, unless the Special Servicer has previously determined, based on a report prepared by a person who regularly conducts environmental audits (which report will be an expense of the Trust Fund), that: (i) the Mortgaged Property is in compliance with applicable environmental laws; or if not, that taking such actions as are necessary to bring the Mortgaged Property in compliance therewith is reasonably likely to produce a greater recovery on a present value basis, after taking into account any risks associated therewith, than not taking such actions; and (ii) and there are no circumstances present at the Mortgaged Property relating to the use, management or disposal of any hazardous substances, hazardous materials, wastes, or petroleum-based materials for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any federal, state or local law or regulation or that, if any such materials are present, taking such action with respect to the affected Mortgaged Property is reasonably likely to produce a greater recovery on a present value basis, after taking into account any risks associated therewith, than not taking such actions. To the extent provided in the related Prospectus Supplement, if title to any Mortgaged Property is acquired by a Trust Fund as to which a REMIC election has been made, the Special Servicer, on behalf of the Trust Fund, will be required to sell the Mortgaged Property before the close of the third calendar year following the calendar year in which the Mortgaged Property is acquired, unless (i) the Internal Revenue Service grants an extension of time to sell such property or (ii) the Trustee receives an opinion of independent counsel to the effect that the holding of the property by the Trust Fund subsequent to such period will not result in the imposition of a tax on the Trust Fund or cause the Trust Fund to fail to qualify as a REMIC under the Code at any time that any Certificate is outstanding. Subject to the foregoing, the Special Servicer will be required to (i) solicit bids for any Mortgaged Property so acquired in such a manner as will be reasonably likely to realize a fair price for such property and (ii) accept the first (and, if multiple bids are contemporaneously received, the highest) cash bid received from any person that constitutes a fair price. If the Trust Fund acquires title to any Mortgaged Property, the Special Servicer, on behalf of the Trust Fund, may retain an independent contractor to manage and operate such property. The retention of an independent contractor, however, will not relieve the Special Servicer of any of its obligations with respect to the management and operation of such Mortgaged Property. To the extent specified in the related Prospectus Supplement, any such property acquired by the Trust Fund will be managed in a manner consistent with the management and operation of similar property by a prudent lending institution. - 41 - The limitations imposed by the related Agreement and the REMIC provisions of the Code (if a REMIC election has been made with respect to the related Trust Fund) on the operations and ownership of any Mortgaged Property acquired on behalf of the Trust Fund may result in the recovery of an amount less than the amount that would otherwise be recovered. See "Certain Legal Aspects of the Mortgage Loans and the Leases -- Foreclosure." If recovery on a defaulted Mortgage Loan under any related instrument of Credit Support is not available, the Special Servicer nevertheless will be obligated to follow or cause to be followed such normal practices and procedures as it deems necessary or advisable to realize upon the defaulted Mortgage Loan. If the proceeds of any liquidation of the property securing the defaulted Mortgage Loan are less than the outstanding principal balance of the defaulted Mortgage Loan plus interest accrued thereon at the Mortgage Interest Rate plus the aggregate amount of expenses incurred by the Special Servicer in connection with such proceedings and which are reimbursable under the Agreement, the Trust Fund will realize a loss in the amount of such difference. The Special Servicer will be entitled to withdraw or cause to be withdrawn from a related Account out of the Liquidation Proceeds recovered on any defaulted Mortgage Loan, prior to the distribution of such Liquidation Proceeds to Certificateholders, amounts representing its normal servicing compensation on the Mortgage Loan, unreimbursed servicing expenses incurred with respect to the Mortgage Loan and any unreimbursed advances of delinquent payments made with respect to the Mortgage Loan. If any property securing a defaulted Mortgage Loan is damaged and proceeds, if any, from the related hazard insurance policy are insufficient to restore the damaged property to a condition sufficient to permit recovery under the related instrument of Credit Support, if any, the Special Servicer is not required to expend its own funds to restore the damaged property unless it determines (i) that such restoration will increase the proceeds to Certificateholders on liquidation of the Mortgage Loan after reimbursement of the Master Servicer for its expenses and (ii) that such expenses will be recoverable by it from related Insurance Proceeds or Liquidation Proceeds. HAZARD INSURANCE POLICIES To the extent specified in the related Prospectus Supplement, each Agreement for a Trust Fund that includes Whole Loans will require the Primary Servicer to cause the Mortgagor on each Whole Loan to maintain a hazard insurance policy providing for such coverage as is required under the related Mortgage. To the extent specified in the related Prospectus Supplement, such coverage will be in general in an amount equal to the amount necessary to fully compensate for any damage or loss to the improvements on the Mortgaged Property on a replacement cost basis, but not less than the amount necessary to avoid the application of any co-insurance clause contained in the hazard insurance policy. The ability of the Primary Servicer to assure that hazard insurance proceeds are appropriately applied may be dependent upon its being named as an additional insured under any hazard insurance policy and under any other insurance policy referred to below, or upon the extent to which information in this regard is furnished by Mortgagors. All amounts collected by the Primary Servicer under any such policy (except for amounts to be applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance with the Primary Servicer's normal servicing procedures, subject to the terms and conditions of the related Mortgage and Mortgage Note) will be deposited in a related Account. In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements of the property by fire, lightning, explosion, smoke, windstorm and hail, and riot, strike and civil commotion, subject to the conditions and exclusions specified in each policy. Although the policies relating to the Whole Loans will be underwritten by different insurers under different state laws in accordance with different applicable state forms, and therefore will not contain identical terms and conditions, the basic terms thereof are dictated by respective state laws, and most such policies typically do not cover any physical damage resulting from war, revolution, governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mudflows), wet or dry rot, vermin, domestic animals and certain other kinds of uninsured risks. The hazard insurance policies covering the Mortgaged Properties securing the Whole Loans will typically contain a co-insurance clause that in effect requires the insured at all times to carry insurance of a specified percentage (generally 80% to 90%) of the full replacement value of the improvements on the property in order to recover the full amount of any partial loss. If the insured's coverage falls below this specified percentage, such clause generally provides that the insurer's liability in the event of partial loss does not exceed the lesser of (i) the replacement cost of the improvements less physical depreciation and (ii) such proportion of the loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of such improvements. The Agreements for a Trust Fund that includes Whole Loans will require the Primary Servicer to cause the Mortgagor on each Whole Loan, or, in certain cases, the related Lessee, to maintain all such other insurance coverage with respect to the related Mortgaged Property as is consistent with the terms of the related Mortgage, which insurance - 42 - may typically include flood insurance (if the related Mortgaged Property was located at the time of origination in a federally designated flood area). In addition, to the extent required by the related Mortgage, the Primary Servicer may require the Mortgagor or related Lessee to maintain other forms of insurance including, but not limited to, loss of rent endorsements, business interruption insurance and comprehensive public liability insurance. Any cost incurred by the Master Servicer in maintaining any such insurance policy will be added to the amount owing under the Mortgage Loan where the terms of the Mortgage Loan so permit; PROVIDED, HOWEVER, that the addition of such cost will not be taken into account for purposes of calculating the distribution to be made to Certificateholders. Such costs may be recovered by a Servicer from a related Account, with interest thereon, as provided by the Agreements. RENTAL INTERRUPTION INSURANCE POLICY If so specified in the related Prospectus Supplement, the Primary Servicer or the Mortgagors will maintain rental interruption insurance policies in full force and effect with respect to some or all of the Leases. Although the terms of such policies vary to some degree, a rental interruption insurance policy typically provides that, to the extent that a Lessee fails to make timely rental payments under the related Lease due to a casualty event, such losses will be reimbursed to the insured. If so specified in the related Prospectus Supplement, the Primary Servicer will be required to pay from its servicing compensation the premiums on the rental interruption policy on a timely basis. If so specified in the Prospectus Supplement, if such rental interruption policy is canceled or terminated for any reason (other than the exhaustion of total policy coverage), the Primary Servicer will exercise its best reasonable efforts to obtain from another insurer a replacement policy comparable to the rental interruption policy with a total coverage that is equal to the then existing coverage of the terminated rental interruption policy; provided that if the cost of any such replacement policy is greater than the cost of the terminated rental interruption policy, the amount of coverage under the replacement policy will, to the extent specified in the related Prospectus Supplement, be reduced to a level such that the applicable premium does not exceed, by a percentage that may be set forth in the related Prospectus Supplement, the cost of the rental interruption policy that was replaced. Any amounts collected by the Primary Servicer under the rental interruption policy in the nature of insurance proceeds will be deposited in a related Account. FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE To the extent specified in the related Prospectus Supplement, the Agreements will require that the Servicers obtain and maintain in effect a fidelity bond or similar form of insurance coverage (which may provide blanket coverage) or any combination thereof insuring against loss occasioned by fraud, theft or other intentional misconduct of the officers, employees and agents of such Servicer. The related Agreements will allow a Servicer to self-insure against loss occasioned by the errors and omissions of the officers, employees and agents of the Master Servicer or the Special Servicer so long as certain criteria set forth in the Agreements are met. DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS Certain of the Whole Loans may contain clauses requiring the consent of the mortgagee to any sale or other transfer of the related Mortgaged Property, or due-on-sale clauses entitling the mortgagee to accelerate payment of the Whole Loan upon any sale or other transfer of the related Mortgaged Property. Certain of the Whole Loans may contain clauses requiring the consent of the mortgagee to the creation of any other lien or encumbrance on the Mortgaged Property or due-on-encumbrance clauses entitling the mortgagee to accelerate payment of the Whole Loan upon the creation of any other lien or encumbrance upon the Mortgaged Property. To the extent provided in the related Prospectus Supplement, the Primary Servicer, on behalf of the Trust Fund, will exercise any right the Trustee may have as mortgagee to accelerate payment of any such Whole Loan or to withhold its consent to any transfer or further encumbrance. To the extent specified in the related Prospectus Supplement, any fee collected by or on behalf of the Primary Servicer for entering into an assumption agreement will be retained by or on behalf of the Primary Servicer as additional servicing compensation. See "Certain Legal Aspects of the Mortgage Loans and the Leases - --Due-on-Sale and Due-on-Encumbrance." RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES The Prospectus Supplement for a Series of Certificates will specify whether there will be any Retained Interest in the Mortgage Assets, and, if so, the initial owner thereof. If so, the Retained Interest will be established on a loan-by-loan basis and will be specified on an exhibit to the related Agreement. A "RETAINED INTEREST" in a Mortgage Asset represents a specified portion of the interest payable thereon. The Retained Interest will be deducted from Mortgagor payments as received and will not be part of the related Trust Fund. - 43 - To the extent specified in the related Prospectus Supplement, each Servicer's primary servicing compensation with respect to a Series of Certificates will come from the periodic payment to it of a portion of the interest payment on each Mortgage Asset. Since any Retained Interest and a Servicer's primary compensation are percentages of the principal balance of each Mortgage Asset, such amounts will decrease in accordance with the amortization of the Mortgage Assets. The Prospectus Supplement with respect to a Series of Certificates evidencing interests in a Trust Fund that includes Whole Loans may provide that, as additional compensation, a Servicer may retain all or a portion of assumption fees, modification fees, late payment charges or Prepayment Premiums collected from Mortgagors and any interest or other income which may be earned on funds held in a related Account. The Master Servicer may, to the extent provided in the related Prospectus Supplement, pay from its servicing compensation certain expenses incurred in connection with its servicing and managing of the Mortgage Assets, including, without limitation, payment of the fees and disbursements of the Trustee and independent accountants, payment of expenses incurred in connection with distributions and reports to Certificateholders, and payment of any other expenses described in the related Prospectus Supplement. Certain other expenses, including certain expenses relating to defaults and liquidations on the Whole Loans and, to the extent so provided in the related Prospectus Supplement, interest thereon at the rate specified therein, and the fees of any Special Servicer, may be borne by the Trust Fund. EVIDENCE AS TO COMPLIANCE Each Servicing Agreement will provide that on or before a specified date in each year, beginning on a date specified therein, a firm of independent public accountants will furnish a statement to the Trustee to the effect that, on the basis of the examination by such firm conducted substantially in compliance with either the Uniform Single Attestation Program for Mortgage Bankers, the servicing by or on behalf of each Servicer was conducted in compliance with the terms of such agreements except for any exceptions the Uniform Single Attestation Program for Mortgage Bankers requires it to report. Each Servicing Agreement will also provide for delivery to the Trustee, on or before a specified date in each year, of an annual statement signed by an officer of each Servicer to the effect that such Servicer has fulfilled its obligations under the Agreement throughout the preceding calendar year or other specified twelve-month period. To the extent provided in the related Prospectus Supplement, copies of such annual accountants' statement and such statements of officers will be obtainable by Certificateholders and Beneficial Owners without charge upon written request to the Master Servicer at the address set forth in the related Prospectus Supplement; provided that such Beneficial Owner shall have certified to the Master Servicer that it is the Beneficial Owner of a Certificate. CERTAIN MATTERS REGARDING EACH SERVICER AND THE DEPOSITOR The Master Servicer, the Primary Servicer and the Special Servicer, or a servicer for substantially all the Whole Loans under each Agreement will be named in the related Prospectus Supplement. Each entity serving as Servicer (or as such servicer) may be an affiliate of the Depositor and may have other normal business relationships with the Depositor or the Depositor's affiliates. Reference herein to a Servicer shall be deemed to be to the servicer of substantially all of the Whole Loans, if applicable. To the extent specified in the related Prospectus Supplement, the related Agreement will provide that any Servicer may resign from its obligations and duties thereunder only with the consent of the Trustee, which may not be unreasonably withheld or upon a determination that its duties under the Agreement are no longer permissible under applicable law. No such resignation will become effective until a successor servicer has assumed such Servicer's obligations and duties under the related Servicing Agreement. If a Primary Servicer resigns, the Master Servicer shall assume the obligations thereof. To the extent specified in the related Prospectus Supplement, each Servicing Agreement will further provide that none of the Servicers, or any officer, employee, or agent thereof will be under any liability to the related Trust Fund or Certificateholders for any action taken, or for refraining from the taking of any action in accordance with the Servicing standards set forth in the Servicing Agreement, in good faith pursuant to the related Servicing Agreement; PROVIDED, HOWEVER, that no Servicer nor any such person will be protected against any breach of a representation or warranty made in such Agreement, or against any liability specifically imposed thereby, or against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in the performance of duties thereunder or by reason of reckless disregard of obligations and duties thereunder. To the extent specified in the related Prospectus Supplement, the Depositor shall be liable only to the extent of its obligations specifically imposed upon and - 44 - undertaken by the Depositor. To the extent specified in the related Prospectus Supplement, each Servicing Agreement will further provide that each Servicer will be entitled to indemnification by the related Trust Fund against any loss, liability or expense incurred in connection with any legal action relating to the related Servicing Agreement or the Mortgage Loans; PROVIDED, HOWEVER, that such indemnification will not extend to any loss, liability or expense incurred by reason of misfeasance, bad faith or negligence in the performance of obligations or duties thereunder, or by reason of reckless disregard of such obligations or duties. In addition, each Servicing Agreement will provide that no Servicer will be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its responsibilities under the Servicing Agreement and which in its opinion may involve it in any expense or liability. Any Servicer may, however, with the consent of the Trustee undertake any such action which it may deem necessary or desirable with respect to the Agreement and the rights and duties of the parties thereto and the interests of the Certificateholders thereunder. In such event, the legal expenses and costs of such action and any liability resulting therefrom will be expenses, costs and liabilities of the Certificateholders, and the Servicer will be entitled to be reimbursed therefor. Any person into which a Servicer or the Depositor may be merged or consolidated, or any person resulting from any merger or consolidation to which a Servicer or the Depositor is a party, or any person succeeding to the business of a Servicer or the Depositor will be the successor of such Servicer or the Depositor, as applicable, under the related Agreements. EVENTS OF DEFAULT To the extent provided in the related Prospectus Supplement for a Trust Fund that includes Whole Loans, "EVENTS OF DEFAULT" with respect to a Servicer under the related Agreements will include (i) any failure by such Servicer to distribute or cause to be distributed to the Trustee, another Servicer or the Certificateholders, any required payment within one Business Day of the date due; (ii) any failure by such Servicer to timely deliver a report that continues unremedied for two days after receipt of notice of such failure has been given to such Servicer by the Trustee or another Servicer; (iii) any failure by such Servicer duly to observe or perform in any material respect any of its other covenants or obligations under the Agreement which continues unremedied for thirty days after written notice of such failure has been given to such Servicer; (iv) any breach of a representation or warranty made by such Servicer under the Agreement which materially and adversely affects the interests of Certificateholders and which continues unremedied for thirty days after written notice of such breach has been given to such Servicer; (v) certain events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings and certain actions by or on behalf of such Servicer indicating its insolvency or inability to pay its obligations; and (vi) any failure by such Servicer to maintain a required license to do business or service the Mortgage Loans pursuant to the related Agreements. Material variations to the foregoing Events of Default (other than to shorten cure periods or eliminate notice requirements) will be specified in the related Prospectus Supplement. To the extent specified in the related Prospectus Supplement, the Trustee shall, not later than the later of 60 days after the occurrence of any event which constitutes or, with notice or lapse of time or both, would constitute an Event of Default and five days after certain officers of the Trustee become aware of the occurrence of such an event, transmit by mail to the Depositor and all Certificateholders of the applicable Series notice of such occurrence, unless such default shall have been cured or waived. RIGHTS UPON EVENT OF DEFAULT So long as an Event of Default under an Agreement remains unremedied, the Depositor or the Trustee may, and at the direction of holders of Certificates evidencing not less than 25% of the Voting Rights, the Trustee shall, terminate all of the rights and obligations of the related Servicer under the Agreement and in and to the Mortgage Loans (other than as a Certificateholder or as the owner of any Retained Interest), whereupon the Master Servicer (or if such Servicer is the Master Servicer, the Trustee) will succeed to all of the responsibilities, duties and liabilities of such Servicer under the Agreements (except that if the Trustee is prohibited by law from obligating itself to make advances regarding delinquent mortgage loans, or if the related Prospectus Supplement so specifies, then the Trustee will not be obligated to make such advances) and will be entitled to similar compensation arrangements. To the extent specified in the related Prospectus Supplement, in the event that the Trustee is unwilling or unable so to act, it may or, at the written request of the holders of Certificates entitled to at least 25% of the Voting Rights, it shall appoint, or petition a court of competent jurisdiction for the appointment of, a loan servicing institution acceptable to the Rating Agency with a net worth at the time of such appointment of at least $15,000,000 to act as successor to the Master Servicer under the Agreement. Pending such appointment, the Trustee is obligated to act in such capacity. The Trustee and any such successor may agree upon the servicing compensation to be paid, which in no event may be greater than the compensation payable to the Master Servicer under the Agreement. - 45 - To the extent described in the related Prospectus Supplement, the holders of Certificates representing at least 66 2/3% of the Voting Rights allocated to the respective classes of Certificates affected by any Event of Default will be entitled to waive such Event of Default; PROVIDED, HOWEVER, that an Event of Default involving a failure to distribute a required payment to Certificateholders described in clause (i) under "--Events of Default" may be waived only by all of the Certificateholders. Upon any such waiver of an Event of Default, such Event of Default shall cease to exist and shall be deemed to have been remedied for every purpose under the Agreement. No Certificateholder will have the right under any Agreement to institute any proceeding with respect thereto unless such holder previously has given to the Trustee written notice of default and unless the holders of Certificates evidencing not less than 25% of the Voting Rights have made written request upon the Trustee to institute such proceeding in its own name as Trustee thereunder and have offered to the Trustee reasonable indemnity, and the Trustee for sixty days has neglected or refused to institute any such proceeding. The Trustee, however, is under no obligation to exercise any of the trusts or powers vested in it by any Agreement or to make any investigation of matters arising thereunder or to institute, conduct or defend any litigation thereunder or in relation thereto at the request, order or direction of any of the holders of Certificates covered by such Agreement, unless such Certificateholders have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby. As described under "Description of the Certificates -- Book-Entry Registration and Definitive Certificates," unless and until Definitive Certificates are issued, Beneficial Owners may only exercise their rights as owners of Certificates indirectly through DTC, or their respective Participants and Indirect Participants. AMENDMENT Each Agreement may be amended by the parties thereto, without the consent of any of the holders of Certificates covered by the Agreement, (i) to cure any ambiguity, (ii) to correct, modify or supplement any provision therein which may be inconsistent with any other provision therein, (iii) to make any other provisions with respect to matters or questions arising under the Agreement which are not inconsistent with the provisions thereof, or (iv) to comply with any requirements imposed by the Code; provided that such amendment (other than an amendment for the purpose specified in clause (iv) above) will not (as evidenced by an opinion of counsel to such effect) adversely affect in any material respect the interests of any holder of Certificates covered by the Agreement. To the extent specified in the related Prospectus Supplement, each Agreement may also be amended by the Depositor, the Master Servicer, if any, and the Trustee, with the consent of the holders of Certificates affected thereby evidencing not less than 51% of the Voting Rights, for any purpose; PROVIDED, HOWEVER, that to the extent specified in the related Prospectus Supplement, no such amendment may (i) reduce in any manner the amount of or delay the timing of, payments received or advanced on Mortgage Loans which are required to be distributed on any Certificate without the consent of the holder of such Certificate, (ii) adversely affect in any material respect the interests of the holders of any class of Certificates in a manner other than as described in (i), without the consent of the holders of all Certificates of such class or (iii) modify the provisions of such Agreement described in this paragraph without the consent of the holders of all Certificates covered by such Agreement then outstanding. However, with respect to any Series of Certificates as to which a REMIC election is to be made, the Trustee will not consent to any amendment of the Agreement unless it shall first have received an opinion of counsel to the effect that such amendment will not result in the imposition of a tax on the related Trust Fund or cause the related Trust Fund to fail to qualify as a REMIC at any time that the related Certificates are outstanding. THE TRUSTEE The Trustee under each Agreement will be named in the related Prospectus Supplement. The commercial bank, national banking association, banking corporation or trust company serving as Trustee may have a banking relationship with the Depositor and its affiliates and with any Master Servicer and its affiliates. DUTIES OF THE TRUSTEE The Trustee will make no representations as to the validity or sufficiency of any Agreement, the Certificates or any Trust Asset or related document and is not accountable for the use or application by or on behalf of any Servicer of any funds paid to such Servicer or its designee in respect of the Certificates or the Trust Assets, or deposited into or withdrawn from any Account or any other account by or on behalf of any Servicer. If no Event of Default has occurred and is continuing, the Trustee is required to perform only those duties specifically required under the related Agreements. However, upon receipt of the various certificates, reports or other instruments required to be furnished to - 46 - it, the Trustee is required to examine such documents and to determine whether they conform to the requirements of the Agreements. CERTAIN MATTERS REGARDING THE TRUSTEE To the extent specified in the related Prospectus Supplement, the Trustee and any director, officer, employee or agent of the Trustee shall be entitled to indemnification out of the Distribution Account for any loss, liability or expense (including costs and expenses of litigation, and of investigation, counsel fees, damages, judgments and amounts paid in settlement) incurred in connection with the Trustee's (i) enforcing its rights and remedies and protecting the interests, and enforcing the rights and remedies, of the Certificateholders during the continuance of an Event of Default, (ii) defending or prosecuting any legal action in respect of the related Agreement or Series of Certificates, (iii) being the mortgagee of record with respect to the Mortgage Loans in a Trust Fund and the owner of record with respect to any Mortgaged Property acquired in respect thereof for the benefit of Certificateholders, or (iv) acting or refraining from acting in good faith at the direction of the holders of the related Series of Certificates entitled to not less than 25% (or such higher percentage as is specified in the related Agreement with respect to any particular matter) of the Voting Rights for such Series; PROVIDED, HOWEVER, that such indemnification will not extend to any loss, liability or expense that constitutes a specific liability of the Trustee pursuant to the related Agreement, or to any loss, liability or expense incurred by reason of willful misfeasance, bad faith or negligence on the part of the Trustee in the performance of its obligations and duties thereunder, or by reason of its reckless disregard of such obligations or duties, or as may arise from a breach of any representation, warranty or covenant of the Trustee made therein. RESIGNATION AND REMOVAL OF THE TRUSTEE The Trustee may at any time resign from its obligations and duties under an Agreement by giving written notice thereof to the Depositor, the Master Servicer, if any, and all Certificateholders. Upon receiving such notice of resignation, the Depositor is required promptly to appoint a successor trustee acceptable to the Master Servicer, if any. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. If at any time the Trustee shall cease to be eligible to continue as such under the related Agreements, or if at any time the Trustee shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Depositor may remove the Trustee and appoint a successor trustee acceptable to the Master Servicer, if any. Holders of the Certificates of any Series entitled to at least 51% of the Voting Rights for such Series may at any time remove the Trustee without cause and appoint a successor trustee. Any resignation or removal of the Trustee and appointment of a successor trustee shall not become effective until acceptance of appointment by the successor trustee. DESCRIPTION OF CREDIT SUPPORT GENERAL For any Series of Certificates, Credit Support may be provided with respect to one or more classes thereof or the related Mortgage Assets. Credit Support may be in the form of the subordination of one or more classes of Certificates, letters of credit, insurance policies, guarantees, the establishment of one or more reserve funds or another method of Credit Support described in the related Prospectus Supplement, or any combination of the foregoing. If so provided in the related Prospectus Supplement, any form of Credit Support may be structured so as to be drawn upon by more than one Series to the extent described therein. Unless otherwise provided in the related Prospectus Supplement for a Series of Certificates, the Credit Support will not provide protection against all risks of loss and will not guarantee repayment of the entire Certificate Balance of the Certificates and interest thereon. If losses or shortfalls occur that exceed the amount covered by Credit Support or that are not covered by Credit Support, Certificateholders will bear their allocable share of deficiencies. Moreover, if a form of Credit Support covers more than one Series of Certificates (each, a "COVERED TRUST"), holders of Certificates evidencing interests in any of such Covered Trusts will be subject to the risk that such Credit Support will - 47 - be exhausted by the claims of other Covered Trusts prior to such Covered Trust receiving any of its intended share of such coverage. If Credit Support is provided with respect to one or more classes of Certificates of a Series, or the related Mortgage Assets, the related Prospectus Supplement will include a description of (a) the nature and amount of coverage under such Credit Support, (b) any conditions to payment thereunder not otherwise described herein, (c) the conditions (if any) under which the amount of coverage under such Credit Support may be reduced and under which such Credit Support may be terminated or replaced and (d) the material provisions relating to such Credit Support. Additionally, the related Prospectus Supplement will set forth certain information with respect to the obligor under any instrument of Credit Support, including (i) a brief description of its principal business activities, (ii) its principal place of business, place of incorporation and the jurisdiction under which it is chartered or licensed to do business, (iii) if applicable, the identity of regulatory agencies that exercise primary jurisdiction over the conduct of its business and (iv) its total assets, and its stockholders' or policyholders' surplus, if applicable, as of the date specified in the Prospectus Supplement. See "Risk Factors -- Credit Support Limitations." SUBORDINATE CERTIFICATES If so specified in the related Prospectus Supplement, one or more classes of Certificates of a Series may be Subordinate Certificates. To the extent specified in the related Prospectus Supplement, the rights of the holders of Subordinate Certificates to receive distributions of principal and interest from the Distribution Account on any Distribution Date will be subordinated to such rights of the holders of Senior Certificates. If so provided in the related Prospectus Supplement, the subordination of a class may apply only in the event of (or may be limited to) certain types of losses or shortfalls. The related Prospectus Supplement will set forth information concerning the amount of subordination of a class or classes of Subordinate Certificates in a Series, the circumstances in which such subordination will be applicable and the manner, if any, in which the amount of subordination will be effected. CROSS-SUPPORT PROVISIONS If the Mortgage Assets for a Series are divided into separate groups, each supporting a separate class or classes of Certificates of a Series, credit support may be provided by cross-support provisions requiring that distributions be made on Senior Certificates evidencing interests in one group of Mortgage Assets prior to distributions on Subordinate Certificates evidencing interests in a different group of Mortgage Assets within the Trust Fund. The Prospectus Supplement for a Series that includes a cross-support provision will describe the manner and conditions for applying such provisions. INSURANCE OR GUARANTEES WITH RESPECT TO THE WHOLE LOANS If so provided in the Prospectus Supplement for a Series of Certificates, the Whole Loans in the related Trust Fund will be covered for various default risks by insurance policies or guarantees. A copy of any such material instrument for a Series will be filed with the Commission as an exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance of the Certificates of the related Series. LETTER OF CREDIT If so provided in the Prospectus Supplement for a Series of Certificates, deficiencies in amounts otherwise payable on such Certificates or certain classes thereof will be covered by one or more letters of credit, issued by a bank or financial institution specified in such Prospectus Supplement (the "L/C BANK"). Under a letter of credit, the L/C Bank will be obligated to honor draws thereunder in an aggregate fixed dollar amount, net of unreimbursed payments thereunder, generally equal to a percentage specified in the related Prospectus Supplement of the aggregate principal balance of the Mortgage Assets on the related Cut-off Date or of the initial aggregate Certificate Balance of one or more classes of Certificates. If so specified in the related Prospectus Supplement, the letter of credit may permit draws in the event of only certain types of losses and shortfalls. The amount available under the letter of credit will, in all cases, be reduced to the extent of the unreimbursed payments thereunder and may otherwise be reduced as described in the related Prospectus Supplement. The obligations of the L/C Bank under the letter of credit for each Series of Certificates will expire at the earlier of the date specified in the related Prospectus Supplement or the termination of the Trust Fund. A copy of any such letter of credit for a Series will be filed with the Commission as an exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance of the Certificates of the related Series. - 48 - INSURANCE POLICIES AND SURETY BONDS If so provided in the Prospectus Supplement for a Series of Certificates, deficiencies in amounts otherwise payable on such Certificates or certain classes thereof will be covered by insurance policies and/or surety bonds provided by one or more insurance companies or sureties. Such instruments may cover, with respect to one or more classes of Certificates of the related Series, timely distributions of interest and/or full distributions of principal on the basis of a schedule of principal distributions set forth in or determined in the manner specified in the related Prospectus Supplement. A copy of any such instrument for a Series will be filed with the Commission as an exhibit to a Current Report on Form 8-K to be filed with the Commission within 15 days of issuance of the Certificates of the related Series. RESERVE FUNDS If so provided in the Prospectus Supplement for a Series of Certificates, deficiencies in amounts otherwise payable on such Certificates or certain classes thereof will be covered by one or more reserve funds in which cash, a letter of credit, Permitted Investments, a demand note or a combination thereof will be deposited, in the amounts so specified in such Prospectus Supplement. The reserve funds for a Series may also be funded over time by depositing therein a specified amount of the distributions received on the related Trust Assets as specified in the related Prospectus Supplement. Amounts on deposit in any reserve fund for a Series, together with the reinvestment income thereon, if any, will be applied for the purposes, in the manner, and to the extent specified in the related Prospectus Supplement. A reserve fund may be provided to increase the likelihood of timely distributions of principal of and interest on the Certificates. If so specified in the related Prospectus Supplement, reserve funds may be established to provide limited protection against only certain types of losses and shortfalls. Following each Distribution Date amounts in a reserve fund in excess of any amount required to be maintained therein may be released from the reserve fund under the conditions and to the extent specified in the related Prospectus Supplement and will not be available for further application to the Certificates. Moneys deposited in any Reserve Funds will be invested in Permitted Investments, except as otherwise specified in the related Prospectus Supplement. To the extent specified in the related Prospectus Supplement, any reinvestment income or other gain from such investments will be credited to the related Reserve Fund for such Series, and any loss resulting from such investments will be charged to such Reserve Fund. However, such income may be payable to any related Master Servicer or another service provider as additional compensation. The Reserve Fund, if any, for a Series will not be a part of the Trust Fund unless otherwise specified in the related Prospectus Supplement. Additional information concerning any Reserve Fund will be set forth in the related Prospectus Supplement, including the initial balance of such Reserve Fund, the balance required to be maintained in the Reserve Fund, the manner in which such required balance will decrease over time, the manner of funding such Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to make distributions to Certificateholders and use of investment earnings from the Reserve Fund, if any. CREDIT SUPPORT WITH RESPECT TO CMBS If so provided in the Prospectus Supplement for a Series of Certificates, the CMBS in the related Trust Fund and/or the Mortgage Loans underlying such CMBS may be covered by one or more of the types of Credit Support described herein. The related Prospectus Supplement will specify as to each such form of Credit Support the information indicated above with respect thereto, to the extent such information is material and available. CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND THE LEASES The following discussion contains general summaries of certain legal aspects of loans secured by commercial and multifamily residential properties that are general in nature. Because such legal aspects are governed by applicable state law (which laws may differ substantially), the summaries do not purport to be complete nor to reflect the laws of any particular state, nor to encompass the laws of all states in which the security for the Mortgage Loans is situated. The summaries are qualified in their entirety by reference to the applicable federal and state laws governing the Mortgage Loans. See "Description of the Trust Funds -- Assets." - 49 - GENERAL All of the Mortgage Loans are loans evidenced by a note or bond and secured by instruments granting a security interest in real property which may be mortgages, deeds of trust, security deeds or deeds to secure debt, depending upon the prevailing practice and law in the state in which the Mortgaged Property is located. Mortgages, deeds of trust and deeds to secure debt are herein collectively referred to as "mortgages." Any of the foregoing types of mortgages will create a lien upon, or grant a title interest in, the subject property, the priority of which will depend on the terms of the particular security instrument, as well as separate, recorded, contractual arrangements with others holding interests in the mortgaged property, the knowledge of the parties to such instrument as well as the order of recordation of the instrument in the appropriate public recording office. However, recording does not generally establish priority over governmental claims for real estate taxes and assessments and other charges imposed under governmental police powers. TYPES OF MORTGAGE INSTRUMENTS A mortgage either creates a lien against or constitutes a conveyance of real property between two parties -- a Mortgagor (the borrower and usually the owner of the subject property) and a mortgagee (the lender). In contrast, a deed of trust is a three-party instrument, among a trustor (the equivalent of a Mortgagor), a trustee to whom the mortgaged property is conveyed, and a beneficiary (the lender) for whose benefit the conveyance is made. As used in this Prospectus, unless the context otherwise requires, "MORTGAGOR" includes the trustor under a deed of trust and a grantor under a security deed or a deed to secure debt. Under a deed of trust, the Mortgagor grants the property, irrevocably until the debt is paid, in trust, generally with a power of sale as security for the indebtedness evidenced by the related note. A deed to secure debt typically has two parties. By executing a deed to secure debt, the grantor conveys title to, as opposed to merely creating a lien upon, the subject property to the grantee until such time as the underlying debt is repaid, generally with a power of sale as security for the indebtedness evidenced by the related mortgage note. In case the Mortgagor under a mortgage is a land trust, there would be an additional party because legal title to the property is held by a land trustee under a land trust agreement for the benefit of the Mortgagor. At origination of a mortgage loan involving a land trust, the Mortgagor executes a separate undertaking to make payments on the mortgage note. The mortgagee's authority under a mortgage, the trustee's authority under a deed of trust and the grantee's authority under a deed to secure debt are governed by the express provisions of the mortgage, the law of the state in which the real property is located, certain federal laws (including, without limitation, the Soldiers' and Sailors' Civil Relief Act of 1940) and, in some cases, in deed of trust transactions, the directions of the beneficiary. INTEREST IN REAL PROPERTY The real property covered by a mortgage, deed of trust, security deed or deed to secure debt is most often the fee estate in land and improvements. However, such an instrument may encumber other interests in real property such as a tenant's interest in a lease of land or improvements, or both, and the leasehold estate created by such lease. An instrument covering an interest in real property other than the fee estate requires special provisions in the instrument creating such interest or in the mortgage, deed of trust, security deed or deed to secure debt, to protect the mortgagee against termination of such interest before the mortgage, deed of trust, security deed or deed to secure debt is paid. The Seller will make certain representations and warranties in the Agreement with respect to the Mortgage Loans which are secured by an interest in a leasehold estate. Such representation and warranties will be set forth in the Prospectus Supplement if applicable. LEASES AND RENTS Mortgages that encumber income-producing property often contain an assignment of rents and leases, pursuant to which the Mortgagor assigns its right, title and interest as landlord under each lease and the income derived therefrom to the lender, while the Mortgagor retains a revocable license to collect the rents for so long as there is no default. Under such assignments, the Mortgagor typically assigns its right, title and interest as lessor under each lease and the income derived therefrom to the mortgagee, while retaining a license to collect the rents for so long as there is no default under the mortgage loan documentation. The manner of perfecting the mortgagee's interest in rents may depend on whether the Mortgagor's assignment was absolute or one granted as security for the loan. Failure to properly perfect the mortgagee's interest in rents may result in the loss of substantial pool of funds, which could otherwise serve as a source of repayment for such loan. If the Mortgagor defaults, the license terminates and the lender is entitled to collect the rents. Local law may require that the lender take possession of the property and/or obtain a court-appointed receiver before becoming entitled to collect the rents. In most states, hotel and motel room rates are considered accounts receivable under the UCC; generally these rates are either assigned by the Mortgagor, which remains entitled to collect such rates absent a default, or pledged by the Mortgagor, as security for the loan. In general, the lender must file financing statements in order to perfect its security interest in the rates and must file continuation statements, generally every five - 50 - years, to maintain perfection of such security interest. Even if the lender's security interest in room rates is perfected under the UCC, the lender will generally be required to commence a foreclosure or otherwise take possession of the property in order to collect the room rates after a default. Even after a foreclosure, the potential rent payments from the property may be less than the periodic payments that had been due under the mortgage. For instance, the net income that would otherwise be generated from the property may be less than the amount that would have been needed to service the mortgage debt if the leases on the property are at below-market rents, or as the result of excessive maintenance, repair or other obligations which a lender succeeds to as landlord. Lenders that actually take possession of the property, however, may incur potentially substantial risks attendant to being a mortgagee in possession. Such risks include liability for environmental clean-up costs and other risks inherent in property ownership. See "Environmental Legislation" below. PERSONALTY Certain types of Mortgaged Properties, such as hotels, motels and industrial plants, are likely to derive a significant part of their value from personal property which does not constitute "fixtures" under applicable state real property law and, hence, would not be subject to the lien of a mortgage. Such property is generally pledged or assigned as security to the lender under the UCC. In order to perfect its security interest therein, the lender generally must file UCC financing statements and, to maintain perfection of such security interest, file continuation statements generally every five years. COOPERATIVE LOANS If specified in the Prospectus Supplement relating to a Series of Offered Certificate, the Mortgage Loans may also consist of cooperative apartment loans ("COOPERATIVE LOANS") secured by security interests in shares issued by cooperative housing corporation (a "COOPERATIVE") and in the related proprietary leases or occupancy agreements granting exclusive rights to occupy specific dwelling units in the cooperatives' buildings. The security agreement will create a lien upon, or grant a title interest in, the property which it covers, the priority of which will depend on the terms of the particular security agreement as well as the order of recordation of the agreement in the appropriate recording office. Such a lien or title interest is not prior to the lien for real estate taxes and assessments and other charges imposed under governmental police powers. Each cooperative owns in fee or has a leasehold interest in all the real property and owns in fee or leases the building and all separate dwelling units therein. The cooperative is directly responsible for property management and, in most cases, payment of real estate taxes, other governmental impositions and hazard and liability insurance. If there is a blanket mortgage or mortgages on the cooperative apartment building or underlying land, as is generally the case, or an underlying lease of the land, as is the case in some instances, the cooperative, as property Mortgagor, or lessee, as the case may be, is also responsible for meeting these mortgage or rental obligations. A blanket mortgage is ordinarily incurred by the cooperative in connection with either the construction or purchase of the cooperative's apartment building or obtaining of capital by the cooperative. The interest of the occupant under proprietary leases or occupancy agreements as to which that cooperative is the landlord are generally subordinate to the interest of the holder of a blanket mortgage and to the interest of the holder of a land lease. If the cooperative is unable to meet the payment obligations (i) arising under a blanket mortgage, the mortgagee holding a blanket mortgage could foreclose on that mortgage and terminate all subordinate proprietary leases and occupancy agreements or (ii) arising under its land lease, the holder of the landlord's interest under the land lease could terminate it and all subordinate proprietary leases and occupancy agreements. Also, a blanket mortgage on a cooperative may provide financing in the form of a mortgage that does not fully amortize, with a significant portion of principal being due in one final payment at maturity. The inability of the cooperative to refinance a mortgage and its consequent inability to make such final payment could lead to foreclosure by the mortgagee. Similarly, a land lease has an expiration date and the inability of the cooperative to extend its term or, in the alternative, to purchase the land could lead to termination of the cooperative's interest in the property and termination of all proprietary leases and occupancy agreement. In either event, a foreclosure by the holder of a blanket mortgage or the termination of the underlying lease could eliminate or significantly diminish the value of any collateral held by whomever financed the purchase by an individual tenant stockholder of cooperative shares or, in the case of the Mortgage Loans, the collateral securing the Cooperative Loans. The cooperative is owned by tenant-stockholders who, through ownership of stock or shares in the corporation, receive proprietary lease or occupancy agreements which confer exclusive rights to occupy specific units. Generally, a tenant-stockholder of a cooperative must make a monthly payment to the cooperative representing such tenant- - 51 - stockholder's pro rata share of the cooperative's payments for its blanket mortgage, real property taxes, maintenance expenses and other capital or ordinary expenses. An ownership interest in a cooperative and accompanying occupancy rights are financed through a cooperative share loan evidenced by a promissory note and secured by an assignment of and a security interest in the occupancy agreement or proprietary lease and a security interest in the related cooperative shares. The lender generally takes possession of the share certificate and a counterpart of the proprietary lease or occupancy agreement and a financing statement covering the proprietary lease or occupancy agreement and the cooperative shares is filed in the appropriate state and local offices to perfect the lender's interest in its collateral. Subject to the limitations discussed below, upon default of the tenant-stockholder, the lender may sue for judgment on the promissory note, dispose of the collateral at a public or private sale or otherwise proceed against the collateral or tenant-stockholder as an individual as provided in the security agreement covering the assignment of the proprietary lease or occupancy agreement and the pledge of cooperative shares. See "--Foreclosure -- Cooperative Loans" below. FORECLOSURE GENERAL Foreclosure is a legal procedure that allows the mortgagee to recover its mortgage debt by enforcing its rights and available legal remedies under the mortgage. If the Mortgagor defaults in payment or performance of its obligations under the note or mortgage, the mortgagee has the right to institute foreclosure proceedings to sell the mortgaged property at public auction to satisfy the indebtedness. Foreclosure procedures with respect to the enforcement of a mortgage vary from state to state. Two primary methods of foreclosing a mortgage are judicial foreclosure and non-judicial foreclosure pursuant to a power of sale granted in the mortgage instrument. There are several other foreclosure procedures available in some states that are either infrequently used or available only in certain limited circumstances, such as strict foreclosure. JUDICIAL FORECLOSURE A judicial foreclosure proceeding is conducted in a court having jurisdiction over the mortgaged property. Generally, the action is initiated by the service of legal pleadings upon all parties having a subordinate interest of record in the real property and all parties in possession of the property, under leases or otherwise, whose interests are subordinate to the mortgage. Delays in completion of the foreclosure may occasionally result from difficulties in locating defendants. When the lender's right to foreclose is contested, the legal proceedings can be time-consuming. Upon successful completion of a judicial foreclosure proceeding, the court generally issues a judgment of foreclosure and appoints a referee or other officer to conduct a public sale of the mortgaged property, the proceeds of which are used to satisfy the judgment. Such sales are made in accordance with procedures that vary from state to state. EQUITABLE LIMITATIONS ON ENFORCEABILITY OF CERTAIN PROVISIONS United States courts have traditionally imposed general equitable principles to limit the remedies available to a mortgagee in connection with foreclosure. These equitable principles are generally designed to relieve the Mortgagor from the legal effect of mortgage defaults, to the extent that such effect is perceived as harsh or unfair. Relying on such principles, a court may alter the specific terms of a loan to the extent it considers necessary to prevent or remedy an injustice, undue oppression or overreaching, or may require the lender to undertake affirmative and expensive actions to determine the cause of the Mortgagor's default and the likelihood that the Mortgagor will be able to reinstate the loan. In some cases, courts have substituted their judgment for the lender's and have required that lenders reinstate loans or recast payment schedules in order to accommodate Mortgagors who are suffering from a temporary financial disability. In other cases, courts have limited the right of the lender to foreclose if the default under the mortgage is not monetary, e.g., the Mortgagor failed to maintain the mortgaged property adequately or the Mortgagor executed a junior mortgage on the mortgaged property. The exercise by the court of its equity powers will depend on the individual circumstances of each case presented to it. Finally, some courts have been faced with the issue of whether federal or state constitutional provisions reflecting due process concerns for adequate notice require that a Mortgagor receive notice in addition to statutorily-prescribed minimum notice. For the most part, these cases have upheld the reasonableness of the notice provisions or have found that a public sale under a mortgage providing for a power of sale does not involve sufficient state action to afford constitutional protections to the Mortgagor. A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are interposed, and sometimes require several years to complete. Moreover, as discussed below, a non-collusive, regularly conducted foreclosure sale may be challenged as a fraudulent conveyance, regardless of the parties' intent, if a court determines that the sale was for less than fair consideration and such sale occurred while the Mortgagor - 52 - was insolvent (or the Mortgagor was rendered insolvent as a result of such sale) and within one year (or within the state statute of limitations if the trustee in bankruptcy elects to proceed under state fraudulent conveyance law) of the filing of bankruptcy. NON-JUDICIAL FORECLOSURE/POWER OF SALE Foreclosure of a deed of trust is generally accomplished by a non-judicial trustee's sale pursuant to the power of sale granted in the deed of trust. A power of sale is typically granted in a deed of trust. It may also be contained in any other type of mortgage instrument. A power of sale allows a non-judicial public sale to be conducted generally following a request from the beneficiary/lender to the trustee to sell the property upon any default by the Mortgagor under the terms of the mortgage note or the mortgage instrument and after notice of sale is given in accordance with the terms of the mortgage instrument, as well as applicable state law. In some states, prior to such sale, the trustee under a deed of trust must record a notice of default and notice of sale and send a copy to the Mortgagor and to any other party who has recorded a request for a copy of a notice of default and notice of sale. In addition in some states the trustee must provide notice to any other party having an interest of record in the real property, including junior lienholders. A notice of sale must be posted in a public place and, in most states, published for a specified period of time in one or more newspapers. The Mortgagor or junior lienholder may then have the right, during a reinstatement period required in some states, to cure the default by paying the entire actual amount in arrears (without acceleration) plus the expenses incurred in enforcing the obligation. In other states, the Mortgagor or the junior lienholder is not provided a period to reinstate the loan, but has only the right to pay off the entire debt to prevent the foreclosure sale. Generally, the procedure for public sale, the parties entitled to notice, the method of giving notice and the applicable time periods are governed by state law and vary among the states. Foreclosure of a deed to secure debt is also generally accomplished by a non-judicial sale similar to that required by a deed of trust, except that the lender or its agent, rather than a trustee, is typically empowered to perform the sale in accordance with the terms of the deed to secure debt and applicable law. PUBLIC SALE A third party may be unwilling to purchase a mortgaged property at a public sale because of the difficulty in determining the value of such property at the time of sale, due to, among other things, redemption rights which may exist and the possibility of physical deterioration of the property during the foreclosure proceedings. For these reasons, it is common for the lender to purchase the mortgaged property for an amount equal to or less than the underlying debt and accrued and unpaid interest plus the expenses of foreclosure. Generally, state law controls the amount of foreclosure costs and expenses which may be recovered by a lender. Thereafter, subject to the Mortgagor's right in some states to remain in possession during a redemption period, if applicable, the lender will become the owner of the property and have both the benefits and burdens of ownership of the mortgaged property. For example, the lender will have the obligation to pay debt service on any senior mortgages, to pay taxes, obtain casualty insurance and to make such repairs at its own expense as are necessary to render the property suitable for sale. Frequently, the lender employs a third party management company to manage and operate the property. The costs of operating and maintaining a commercial or multifamily residential property may be significant and may be greater than the income derived from that property. The costs of management and operation of those mortgaged properties which are hotels, motels, restaurants, nursing or convalescent homes or hospitals may be particularly significant because of the expertise, knowledge and, with respect to nursing or convalescent homes or hospitals, regulatory compliance, required to run such operations and the effect which foreclosure and a change in ownership may have on the public's and the industry's (including franchisors') perception of the quality of such operations. The lender will commonly obtain the services of a real estate broker and pay the broker's commission in connection with the sale of the property. Depending upon market conditions, the ultimate proceeds of the sale of the property may not equal the lender's investment in the property. Moreover, a lender commonly incurs substantial legal fees and court costs in acquiring a mortgaged property through contested foreclosure and/or bankruptcy proceedings. Furthermore, a few states require that any environmental contamination at certain types of properties be cleaned up before a property may be resold. In addition, a lender may be responsible under federal or state law for the cost of cleaning up a mortgaged property that is environmentally contaminated. See "Environmental Legislation." Generally state law controls the amount of foreclosure expenses and costs, including attorneys' fees, that may be recovered by a lender. A junior mortgagee may not foreclose on the property securing the junior mortgage unless it forecloses subject to senior mortgages and any other prior liens, in which case it may be obliged to make payments on the senior mortgages to avoid their foreclosure. In addition, in the event that the foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale" clause contained in a senior mortgage, the junior mortgagee may be required to pay the full amount of the senior mortgage to avoid its foreclosure. Accordingly, with respect to those Mortgage Loans which are junior mortgage loans, if the lender purchases the property the lender's title will be subject to all senior mortgages, prior liens and certain governmental liens. - 53 - The proceeds received by the referee or trustee from the sale are applied first to the costs, fees and expenses of sale and then in satisfaction of the indebtedness secured by the mortgage under which the sale was conducted. Any proceeds remaining after satisfaction of senior mortgage debt are generally payable to the holders of junior mortgages and other liens and claims in order of their priority, whether or not the Mortgagor is in default. Any additional proceeds are generally payable to the Mortgagor. The payment of the proceeds to the holders of junior mortgages may occur in the foreclosure action of the senior mortgage or a subsequent ancillary proceeding or may require the institution of separate legal proceedings by such holders. In connection with a Series of Certificates for which an election is made to qualify the Trust Fund, or a portion thereof, as a REMIC, the REMIC Provisions and the Agreement may require the Master Servicer to hire an independent contractor to operate any foreclosed property relating to Whole Loans. RIGHTS OF REDEMPTION The purposes of a foreclosure action are to enable the mortgagee to realize upon its security and to bar the Mortgagor, and all persons who have an interest in the property which is subordinate to the mortgage being foreclosed, from exercise of their "equity of redemption." The doctrine of equity of redemption provides that, until the property covered by a mortgage has been sold in accordance with a properly conducted foreclosure and foreclosure sale, those having an interest which is subordinate to that of the foreclosing mortgagee have an equity of redemption and may redeem the property by paying the entire debt with interest. In addition, in some states, when a foreclosure action has been commenced, the redeeming party must pay certain costs of such action. Those having an equity of redemption must generally be made parties and joined in the foreclosure proceeding in order for their equity of redemption to be cut off and terminated. The equity of redemption is a common-law (non-statutory) right which exists prior to completion of the foreclosure, is not waivable by the Mortgagor, must be exercised prior to foreclosure sale and should be distinguished from the post-sale statutory rights of redemption. In some states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the Mortgagor and foreclosed junior lienors are given a statutory period in which to redeem the property from the foreclosure sale. In some states, statutory redemption may occur only upon payment of the foreclosure sale price. In other states, redemption may be authorized if the former Mortgagor pays only a portion of the sums due. The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property. The exercise of a right of redemption would defeat the title of any purchaser from a foreclosure sale or sale under a deed of trust. Consequently, the practical effect of the redemption right is to force the lender to maintain the property and pay the expenses of ownership until the redemption period has expired. In some states, a post-sale statutory right of redemption may exist following a judicial foreclosure, but not following a trustee's sale under a deed of trust. Under the REMIC Provisions currently in effect, property acquired by foreclosure generally must not be held after the close of the third calendar year following the calendar year in which the property is acquired. To the extent provided in the related Prospectus Supplement, with respect to a Series of Certificates for which an election is made to qualify the Trust Fund or a part thereof as a REMIC, the Agreement will permit foreclosed property to be held for more than such period if the Internal Revenue Service grants an extension of time within which to sell such property or independent counsel renders an opinion to the effect that holding such property for such additional period is permissible under the REMIC Provisions. ANTI-DEFICIENCY LEGISLATION Some or all of the Mortgage Loans may be nonrecourse loans, as to which recourse may be had only against the specific property securing the related Mortgage Loan and a personal money judgment may not be obtained against the Mortgagor. Even if a mortgage loan by its terms provides for recourse to the Mortgagor, some states impose prohibitions or limitations on such recourse. For example, statutes in some states limit the right of the lender to obtain a deficiency judgment against the Mortgagor following foreclosure or sale under a deed of trust. A deficiency judgment would be a personal judgment against the former Mortgagor equal to the difference between the net amount realized upon the public sale of the real property and the amount due to the lender. Some states require the lender to exhaust the security afforded under a mortgage by foreclosure in an attempt to satisfy the full debt before bringing a personal action against the Mortgagor. In certain other states, the lender has the option of bringing a personal action against the Mortgagor on the debt without first exhausting such security; however, in some of these states, the lender, following judgment on such personal action, may be deemed to have elected a remedy and may be precluded from exercising remedies with respect to the security. In some cases, a lender will be precluded from exercising any additional rights under the note or mortgage if it has taken any prior enforcement action. Consequently, the practical effect of the election requirement, in those states permitting such election, is that lenders will usually proceed against the security first rather - 54 - than bringing a personal action against the Mortgagor. Finally, other statutory provisions limit any deficiency judgment against the former Mortgagor following a judicial sale to the excess of the outstanding debt over the fair market value of the property at the time of the public sale. The purpose of these statutes is generally to prevent a lender from obtaining a large deficiency judgment against the former Mortgagor as a result of low or no bids at the judicial sale. LEASEHOLD RISKS Mortgage Loans may be secured by a mortgage on a ground lease. Leasehold mortgages are subject to certain risks not associated with mortgage loans secured by the fee estate of the Mortgagor. The most significant of these risks is that the ground lease creating the leasehold estate could terminate, leaving the leasehold mortgagee without its security. The ground lease may terminate if, among other reasons, the ground lessee breaches or defaults in its obligations under the ground lease or there is a bankruptcy of the ground lessee or the ground lessor. This risk may be minimized if the ground lease contains certain provisions protective of the mortgagee, but the ground leases that secure Mortgage Loans may not contain some of these protective provisions, and mortgages may not contain the other protections discussed in the next paragraph. Protective ground lease provisions include the right of the leasehold mortgagee to receive notices from the ground lessor of any defaults by the Mortgagor; the right to cure such defaults, with adequate cure periods; if a default is not susceptible of cure by the leasehold mortgagee, the right to acquire the leasehold estate through foreclosure or otherwise; the ability of the ground lease to be assigned to and by the leasehold mortgagee or purchaser at a foreclosure sale and for the concomitant release of the ground lessee's liabilities thereunder; and the right of the leasehold mortgagee to enter into a new ground lease with the ground lessor on the same terms and conditions as the old ground lease in the event of a termination thereof. In addition to the foregoing protections, a leasehold mortgagee may require that the ground lease or leasehold mortgage prohibit the ground lessee from treating the ground lease as terminated in the event of the ground lessor's bankruptcy and rejection of the ground lease by the trustee for the debtor-ground lessor. As further protection, a leasehold mortgage may provide for the assignment of the debtor-ground lessee's right to reject a lease pursuant to Section 365 of the Bankruptcy Reform Act of 1978, as amended (Title 11 of the United States Code) (the "BANKRUPTCY CODE"), although the enforceability of such clause has not been established. Without the protections described above, a leasehold mortgagee may lose the collateral securing its leasehold mortgage. In addition, terms and conditions of a leasehold mortgage are subject to the terms and conditions of the ground lease. Although certain rights given to a ground lessee can be limited by the terms of a leasehold mortgage, the rights of a ground lessee or a leasehold mortgagee with respect to, among other things, insurance, casualty and condemnation will be governed by the provisions of the ground lease. COOPERATIVE LOANS The cooperative shares owned by the tenant-stockholder and pledged to the lender are, in almost all cases, subject to restrictions on transfer as set forth in the Cooperative's Certificate of Incorporation and By- laws, as well as the proprietary lease or occupancy agreement, and may be cancelled by the cooperative for failure by the tenant-stockholder to pay rent or other obligations or charges owed by such tenant-stockholder, including mechanics' liens against the cooperative apartment building incurred by such tenant-stockholder. The proprietary lease or occupancy agreement generally permits the Cooperative to terminate such lease or agreement in the event an obligor fails to make payments or defaults in the performance of covenants required thereunder. Typically, the lender and the Cooperative enter into a recognition agreement which establishes the rights and obligations of both parties in the event of a default by the tenant-stockholder under the proprietary lease or occupancy agreement will usually constitute a default under the security agreement between the lender and the tenant-stockholder. The recognition agreement generally provides that, in the event that the tenant-stockholder has defaulted under the proprietary lease or occupancy agreement is terminated, the Cooperative will recognize the lender's lien against proceeds from the sale of the Cooperative apartment, subject, however, to the Cooperative's right to sums due under such proprietary lease or occupancy agreement. The total amount owed to the Cooperative by the tenant-stockholder, which the lender generally cannot restrict and does not monitor, could reduce the value of the collateral below the outstanding principal balance of the Cooperative Loan and accrued and unpaid interest thereon. Recognition agreements also provide that in the event of a foreclosure on a Cooperative Loan, the lender must obtain the approval or consent of the Cooperative as required by the proprietary lease before transferring the Cooperative shares or assigning the proprietary lease. Generally, the lender is not limited in any rights it may have to dispossess the tenant-stockholders. - 55 - In some states, foreclosure on the Cooperative shares is accomplished by a sale in accordance with the provisions of Article 9 of the UCC and the security agreement relating to those shares. Article 9 of the UCC requires that a sale be conducted in a "commercially reasonable" manner. Whether a foreclosure sale has been conducted in a "commercially reasonable" manner will depend on the facts in each case. In determining commercial reasonableness, a court will look to the notice given the debtor and the method, manner, time, place and terms of the foreclosure. Generally, a sale conducted according to the usual practice of banks selling similar collateral will be considered reasonably conducted. Article 9 of the UCC provides that the proceeds of the sale will be applied first to pay the costs and expenses of the sale and then to satisfy the indebtedness secured by the lender's security interest. The recognition agreement, however, generally provides that the lender's right to reimbursement is subject to the right of the Cooperatives to receive sums due under the proprietary lease or occupancy agreement. If there are proceeds remaining, the lender must account to the tenant-stockholder for the surplus. Conversely, if a portion of the indebtedness remains unpaid, the tenant-stockholder is generally responsible for the deficiency. In the case of foreclosure on a building which was converted from a rental building to a building owned by a Cooperative under a non-eviction plan, some states require that a purchaser at a foreclosure sale take the property subject to rent control and rent stabilization laws which apply to certain tenants who elected to remain in the building was so converted. BANKRUPTCY LAWS The Bankruptcy Code and related state laws may interfere with or affect the ability of a lender to realize upon collateral and/or to enforce a deficiency judgment. For example, under the Bankruptcy Code, virtually all actions (including foreclosure actions and deficiency judgment proceedings) are automatically stayed upon the filing of the bankruptcy petition, and, usually, no interest or principal payments are made during the course of the bankruptcy case. The delay and the consequences thereof caused by such automatic stay can be significant. Also, under the Bankruptcy Code, the filing of a petition in bankruptcy by or on behalf of a junior lienor may stay the senior lender from taking action to foreclose out such junior lien. Under the Bankruptcy Code, provided certain substantive and procedural safeguards for the lender are met, the amount and terms of a mortgage secured by property of the debtor may be modified under certain circumstances. In many jurisdictions, 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 lender's security interest) pursuant to a confirmed plan or lien avoidance proceeding, thus leaving the lender a general unsecured creditor for the difference between such value and the outstanding balance of the loan. Other modifications may include the reduction in the amount of each scheduled payment, which reduction may result from a reduction in the rate of interest and/or the alteration of the repayment schedule (with or without affecting the unpaid principal balance of the loan), and/or an extension (or reduction) of the final maturity date. Some courts with federal bankruptcy jurisdiction have approved plans, based on the particular facts of the reorganization case, that effected the curing of a mortgage loan default by paying arrearages over a number of years. Also, under federal bankruptcy law, a bankruptcy court may permit a debtor through its rehabilitative plan to de-accelerate a secured loan and to reinstate the loan even though the lender accelerated the mortgage loan and final judgment of foreclosure had been entered in state court (provided no sale of the property had yet occurred) prior to the filing of the debtor's petition. This may be done even if the full amount due under the original loan is never repaid. Federal bankruptcy law provides generally that rights and obligation under an unexpired lease of the debtor/lessee may not be terminated or modified at any time after the commencement of a case under the Bankruptcy Code solely on the basis of a provision in the lease to such effect or because of certain other similar events. This prohibition on so-called "ipso facto clauses" could limit the ability of the Trustee for a Series of Certificates to exercise certain contractual remedies with respect to the Leases. In addition, Section 362 of the Bankruptcy Code operates as an automatic stay of, among other things, any act to obtain possession of property from a debtor's estate, which may delay a Trustee's exercise of such remedies for a related Series of Certificates in the event that a related Lessee or a related Mortgagor becomes the subject of a proceeding under the Bankruptcy Code. For example, a mortgagee would be stayed from enforcing a Lease Assignment by a Mortgagor related to a Mortgaged Property if the related Mortgagor was in a bankruptcy proceeding. The legal proceedings necessary to resolve the issues could be time-consuming and might result in significant delays in the receipt of the assigned rents. Similarly, the filing of a petition in bankruptcy by or on behalf of a Lessee of a Mortgaged Property would result in a stay against the commencement or continuation of any state court proceeding for past due rent, for accelerated rent, for damages or for a summary eviction order with respect to a default under the Lease that occurred prior to the filing of the Lessee's petition. Rents and other proceeds - 56 - of a Mortgage Loan may also escape an assignment thereof if the assignment is not fully perfected under state law prior to commencement of the bankruptcy proceeding. See "--Leases and Rents" above. In addition, the Bankruptcy Code generally provides that a trustee or debtor-in-possession may, subject to approval of the court, (a) assume the lease and retain it or assign it to a third party or (b) reject the lease. If the lease is assumed, the trustee in bankruptcy on behalf of the lessee, or the lessee as debtor-in-possession, or the assignee, if applicable, must cure any defaults under the lease, compensate the lessor for its losses and provide the lessor with "adequate assurance" of future performance. Such remedies may be insufficient, however, as the lessor may be forced to continue under the lease with a lessee that is a poor credit risk or an unfamiliar tenant if the lease was assigned, and any assurances provided to the lessor may, in fact, be inadequate. If the lease is rejected, such rejection generally constitutes a breach of the executory contract or unexpired lease immediately before the date of filing the petition. As a consequence, the other party or parties to such lease, such as the Mortgagor, as lessor under a Lease, would have only an unsecured claim against the debtor for damages resulting from such breach, which could adversely affect the security for the related Mortgage Loan. In addition, pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's damages for lease rejection in respect of future rent installments are limited to the rent reserved by the lease, without acceleration, for the greater of one year or 15%, not to exceed three years, of the remaining term of the lease. If a trustee in bankruptcy on behalf of a lessor, or a lessor as debtor-in-possession, rejects an unexpired lease of real property, the lessee may treat such lease as terminated by such rejection or, in the alternative, the lessee may remain in possession of the leasehold for the balance of such term and for any renewal or extension of such term that is enforceable by the lessee under applicable non-bankruptcy law. The Bankruptcy Code provides that if a lessee elects to remain in possession after such a rejection of a lease, the lessee may offset against rents reserved under the lease for the balance of the term after the date of rejection of the lease, and any such renewal or extension thereof, any damages occurring after such date caused by the nonperformance of any obligation of the lessor under the lease after such date. To the extent provided in the related Prospectus Supplement, the Lessee will agree under certain Leases to pay all amounts owing thereunder the Master Servicer without offset. To the extent that such a contractual obligation remains enforceable against the Lessee, the Lessee would not be able to avail itself of the rights of offset generally afforded to lessees of real property under the Bankruptcy Code. In a bankruptcy or similar proceeding of a Mortgagor, action may be taken seeking the recovery, as a preferential transfer or on other grounds, of any payments made by the Mortgagor, or made directly by the related Lessee, under the related Mortgage Loan to the Trust Fund. Payments on long-term debt may be protected from recovery as preferences if they are payments in the ordinary course of business made on debts incurred in the ordinary course of business. Whether any particular payment would be protected depends upon the facts specific to a particular transaction. A trustee in bankruptcy, in some cases, may be entitled to collect its costs and expenses in preserving or selling the mortgaged property ahead of payment to the lender. In certain circumstances, a debtor in bankruptcy may have the power to grant liens senior to 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 to force a restructuring of a mortgage loan on terms a lender would not otherwise accept. Moreover, the laws of certain states also give priority to certain tax liens over the lien of a mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that actions of the mortgagee have been unreasonable, the lien of the related mortgage may be subordinated to the claims of unsecured creditors. To the extent described in the related Prospectus Supplement, certain of the Mortgagors may be partnerships. The laws governing limited partnerships in certain states provide that the commencement of a case under the Bankruptcy Code with respect to a general partner will cause a person to cease to be a general partner of the limited partnership, unless otherwise provided in writing in the limited partnership agreement. This provision may be construed as an "ipso facto" clause and, in the event of the general partner's bankruptcy, may not be enforceable. To the extent described in the related Prospectus Supplement, certain limited partnership agreements of the Mortgagors may provide that the commencement of a case under the Bankruptcy Code with respect to the related general partner constitutes an event of withdrawal (assuming the enforceability of the clause is not challenged in bankruptcy proceedings or, if challenged, is upheld) that might trigger the dissolution of the limited partnership, the winding up of its affairs and the distribution of its assets, unless (i) at the time there was at least one other general partner and the written provisions of the limited partnership permit the business of the limited partnership to be carried on by the remaining general partner and that general partner does so or (ii) the written provisions of the limited partnership agreement permit the limited partner to agree within a specified time frame (often 60 days) after such withdrawal to continue the business of the limited partnership and to the appointment of one or more general partners and the limited partners do so. In addition, the laws governing general partnerships in certain states provide that the commencement of a case under the Bankruptcy Code - 57 - or state bankruptcy laws with respect to a general partner of such partnerships triggers the dissolution of such partnership, the winding up of its affairs and the distribution of its assets. Such state laws, however, may not be enforceable or effective in a bankruptcy case. The dissolution of a Mortgagor, the winding up of its affairs and the distribution of its assets could result in an acceleration of its payment obligation under a related Mortgage Loan, which may reduce the yield on the related Series of Certificates in the same manner as a principal prepayment. In addition, the bankruptcy of the general partner of a Mortgagor that is a partnership may provide the opportunity for a trustee in bankruptcy for such general partner, such general partner as a debtor-in-possession, or a creditor of such general partner to obtain an order from a court consolidating the assets and liabilities of the general partner with those of the Mortgagor pursuant to the doctrines of substantive consolidation or piercing the corporate veil. In such a case, the respective Mortgaged Property, for example, would become property of the estate of such bankrupt general partner. Not only would the Mortgaged Property be available to satisfy the claims of creditors of such general partner, but an automatic stay would apply to any attempt by the Trustee to exercise remedies with respect to such Mortgaged Property. However, such an occurrence should not affect the Trustee's status as a secured creditor with respect to the Mortgagor or its security interest in the Mortgaged Property. ENVIRONMENTAL LEGISLATION Real property pledged as security to a lender may be subject to unforeseen environmental liabilities. Of particular concern may be those Mortgaged Properties which are, or have been, the site of manufacturing, industrial or disposal activity or that are in close proximity to such properties. Such environmental liabilities may give rise to (i) a diminution in value of property securing any Mortgage Loan, (ii) limitation on the ability to foreclose against such property or (iii) in certain circumstances as more fully described below, liability for clean up costs or other remedial actions, which liability could exceed the value of the principal balance of the related Mortgage Loan or of such Mortgaged Property. Under the laws of many states and to some degree under Federal law, contamination on a property may give rise to a lien on the property for cleanup costs. In several states, such a lien has priority over all existing liens (a "superlien") including those of existing mortgages; in these states, the lien of a mortgage contemplated by this transaction may lose its priority to such a superlien. Under the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), a lender may be liable either to the government or to private parties for cleanup costs on a property securing a loan, even if the lender does not cause or contribute to the contamination. CERCLA imposes strict, as well as joint and several, liability on several classes of potentially responsible parties, including current owners and operators of the property, regardless of whether they caused or contributed to the contamination. Many states have laws similar to CERCLA. Lenders may be held liable under CERCLA as owners or operators. Excluded from CERCLA's definition of "owner or operator," however, is a person "who without participating in the management of the facility, holds indicia of ownership primarily to protect his security interest." This exemption for holders of a security interest such as a secured lender applies only in circumstances where the lender acts to protect its security interest in the contaminated facility or property. Thus, if a lender's activities encroach on the actual management of such facility or property, the lender faces potential liability as an "owner or operator" under CERCLA. Similarly, when a lender forecloses and takes title to a contaminated facility or property (whether it holds the facility or property as an investment or leases it to a third party), the lender may incur potential CERCLA liability. A decision in May 1990 of the United States Court of Appeals for the Eleventh Circuit in UNITED STATES V. FLEET FACTORS CORP. very narrowly construed CERCLA's secured-creditor exemption. The court held that a lender need not have involved itself in the day-to-day operations of the facility or participated in decisions relating to hazardous waste to be liable under CERCLA; rather, liability could attach to a lender if its involvement with the management of the facility is broad enough to support the inference that the lender had the capacity to influence the borrower's treatment of hazardous waste. The court added that a lender's capacity to influence such decision could be inferred from the extent of its involvement in the facility's financial management. On April 29, 1992, in response to the decision in FLEET FACTORS CORP., the United States Environmental Protection Agency (the "EPA") adopted a rule interpreting and delineating CERCLA's secured-creditor exemption in EPA enforcement proceedings. The rule attempted to define and specify the range of permissible actions that may be undertaken by a foreclosing lender/holder of a contaminated facility without exceeding the bounds of the secured-creditor exemption. The rule also attempted to specify the circumstances under which governmental or government- - 58 - appointed entities that acquire possession or control of contaminated facilities as conservators or receivers will be considered "involuntary" owners for purposes of CERCLA's "innocent landowner" defense to liability. Issuance of this rule by the EPA under CERCLA did not necessarily affect the potential for liability in actions by either a state or a private party under CERCLA or in actions under other federal or state laws which may impose liability on "owners or operators" but did not incorporate the secured-creditor exemption. The validity of the EPA rule was challenged in the U.S. Court of Appeals for the District of Columbia in KELLEY V. EPA. In an opinion issued on February 4, 1994, the D.C. Circuit Court invalidated EPA's lender liability rule, holding that EPA exceeded its authority in enacting the rule. The U.S. Supreme Court denied certiorari on January 17, 1995. In response, the Department of Justice ("DOJ") and the Agency issued a policy statement entitled "The Effect of Superfund on Lenders That Hold Security Interests in Contaminated Property," published in the Federal Register in Volume 60, Number 237, at pages 63517 to 63519 (December 11, 1995). That policy statement directed parties to the voided rule as the Agency's definitive view on CERCLA's secured creditor exemption, and stated that EPA and DOJ will generally follow the approach of the Lender Liability Rule and its preamble when exercising their enforcement discretion with respect to lenders. Under the KELLEY case, the secured-creditor exemption under CERCLA will be subject to existing case law interpretations. Some of those cases have interpreted the exemption extremely narrowly, but most of the cases since promulgation of the EPA rule have held that a lender is entitled to the protection of the secured-creditor exemption provided that a lender complies with the provisions set out in the EPA rule and does not itself (or through its agents) cause or contribute to contamination. As a result of KELLEY, the cases applying the EPA rule have little, if any, precedential value and, thus, lenders expected a return to the narrower interpretations of the exemption. In fact, recent judicial opinions indicate that a court facing lender liability issues is likely to apply principles and rationale that are consistent with EPA and DOJ's Lender Policy. SEE, E.G., UNITED STATES V. WALLACE, 893 F. Supp. 627 (N.D. Tex. 1995); Z & Z LEASING, INC. V. GRAYING REEL, INC., 873 F. Supp. 51 (E.D. Mich. 1995); KEMP INDUSTRIES, INC. V. SAFETY LIGHT CORP., 857 F. Supp. 373 (D.N.J. 1994). The secured-creditor exemption does not protect a lender from liability under CERCLA in cases where the lender arranges for disposal of hazardous substances or for transportation of hazardous substances. The definition of "hazardous substances" under CERCLA specifically excludes petroleum products, and the secured-creditor exemption does not govern liability for cleanup costs under federal laws other than CERCLA, in particular Subtitle I of the federal Resource Conservation and Recovery Act ("RCRA"), which regulates underground petroleum (other than heating oil) storage tanks. However, the EPA adopted a lender liability rule for underground storage tanks under Subtitle I of RCRA. Under such rule, a holder of a security interest in an underground storage tank or real property containing an underground storage tank is not considered an operator of the underground storage tank as long as petroleum is not added to, stored in or dispensed from the tank. It should be noted, however, that liability for cleanup of petroleum contamination may be governed by state law, which may not provide for any specific protections for secured creditors. If a lender is or becomes liable, it may bring an action for contribution against the owner or operator who created the environmental hazard, but that person or entity may be bankrupt or otherwise judgment proof. It is possible that cleanup costs could become a liability of the Trust Fund and occasion a loss to Certificateholders in certain circumstances described above if such remedial costs were incurred. Finally, as part of the Omnibus Consolidated Appropriations Bill for Fiscal Year 1997 signed by President Clinton on September 30, 1996, Congress enacted the Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of 1996 ("the Act"). The Act includes lender and fiduciary liability amendments to CERCLA, amendments to the secured creditor exemption set forth in Subtitle I of RCRA, and validation of the portion of the CERCLA Lender Liability Rule that addresses involuntary acquisitions by government entities. The amendments made by the Act apply to all claims not finally adjudicated as of September 30, 1996, which include all cases that are in the process of being settled, and are generally based on the CERCLA Lender Liability Rule. However, the amendments do not explicitly describe the steps a lender can take to avoid liability after foreclosure. The related Agreement will provide that the Special Servicer, acting on behalf of the Trustee, may not acquire title to a Mortgaged Property or take over its operation unless the Special Servicer has previously determined, based on a report prepared by a person who regularly conducts environmental assessments, that: (i) such Mortgaged Property is in compliance with applicable environmental laws, or, if not, that taking such actions as are necessary to bring the Mortgaged Property in compliance therewith is likely to produce a greater recovery on a present value basis, after taking into account any risks associated therewith, than not taking such actions and (ii) there are no circumstances present at the Mortgaged Property relating to the use, management or disposal of any Hazardous Materials for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any federal, state or local law or - 59 - regulation. This requirement effectively precludes enforcement of the security for the related Mortgage Note until a satisfactory environmental inquiry is undertaken, or that, if any Hazardous Materials are present for which such action could be required, taking such actions with respect to the affected Mortgaged Property is reasonably likely to produce a greater recovery on a present value basis, after taking into account any risks associated therewith, than not taking such actions, reducing the likelihood that a given Trust Fund will become liable for any condition or circumstance that may give rise to any environmental claim (an "ENVIRONMENTAL HAZARD CONDITION") affecting a Mortgaged Property, but making it more difficult to realize on the security for the Mortgage Loan. However, there can be no assurance that any environmental assessment obtained by the Special Servicer will detect all possible Environmental Hazard Conditions, that any estimate of the costs of effecting compliance at any Mortgaged Property and the recovery thereon will be correct, or that the other requirements of the Agreement, even if fully observed by the Master Servicer or Special Servicer, as the case may be, will in fact insulate a given Trust Fund from liability for Environmental Hazard Conditions. Any additional restrictions on acquiring titles to a Mortgaged Property may be set forth in the related Prospectus Supplement. Unless otherwise specified in the related Prospectus Supplement, the Depositor generally will not have determined whether environmental assessments have been conducted with respect to the Mortgaged Properties relating to the Mortgage Loans included in the Mortgage Pool for a Series, and it is likely that any environmental assessments which would have been conducted with respect to any of the Mortgaged Properties would have been conducted at the time of the origination of the related Mortgage Loans and not thereafter. If specified in the related Prospectus Supplement, a Warranting Party will represent and warrant that based on an environmental audit commissioned by Warranting Party, as of the date of the origination of a Mortgage Loan, the related Mortgaged Property is not affected by a Disqualifying Condition (as defined below). No such person will however, be responsible for any Disqualifying Condition which may arise on a Mortgaged Property after the date of origination of the related Mortgage Loan, whether due to actions of the Mortgagor, the Master Servicer, the Primary Servicer, the Special Servicer or any other person. It may not always be possible to determine whether a Disqualifying Condition arose prior or subsequent to the date of the origination of the related Mortgage Loan. A "DISQUALIFYING CONDITION" is defined generally as a condition which would reasonably be expected to (1) constitute or result in a violation of applicable environmental laws, (2) require any expenditure material in relation to the principal balance of the related Mortgage Loan to achieve or maintain compliance in all material respects with any applicable environmental laws, or (3) require substantial cleanup, remedial action or other extraordinary response under any applicable environmental laws in excess of a specified escrowed amount. "HAZARDOUS MATERIALS" are generally defined under several federal and state statutes, and include dangerous toxic or hazardous pollutants, chemicals, wastes or substances, including, without limitation, those so identified pursuant to CERCLA, and specifically including, asbestos and asbestos containing materials, polychlorinated biphenyls, radon gas, petroleum and petroleum products and urea formaldehyde. DUE-ON-SALE AND DUE-ON-ENCUMBRANCE Certain of the Mortgage Loans may contain due-on-sale and due-on-encumbrance clauses. These clauses generally provide that the lender may accelerate the maturity of the loan if the Mortgagor sells or otherwise transfers or encumbers the mortgaged property. Certain of these clauses may provide that, upon an attempted breach thereof by the Mortgagor of an otherwise non-recourse loan, the Mortgagor becomes personally liable for the mortgage debt. The enforceability of due-on-sale clauses has been the subject of legislation or litigation in many states and, in some cases, the enforceability of these clauses was limited or denied. However, with respect to certain loans the Garn-St Germain Depository Institutions Act of 1982 preempts state constitutional, statutory and case law that prohibits the enforcement of due-on-sale clauses and permits lenders to enforce these clauses in accordance with their terms subject to certain limited exceptions. To the extent provided in the related Prospectus Supplement, a Master Servicer or a Primary Servicer, on behalf of the Trust Fund, will determine whether to exercise any right the Trustee may have as mortgagee to accelerate payment of any such Mortgage Loan or to withhold its consent to any transfer or further encumbrance in a manner consistent with the Servicing Standard. In addition, under federal bankruptcy laws, due-on-sale clauses may not be enforceable in bankruptcy proceedings and may, under certain circumstances, be eliminated in any modified mortgage resulting from such bankruptcy proceeding. - 60 - SUBORDINATE FINANCING Where the Mortgagor encumbers mortgaged property with one or more junior liens, the senior lender is subjected to additional risk. First, the Mortgagor may have difficulty servicing and repaying multiple loans. In addition, if the junior loan permits recourse to the Mortgagor (as junior loans often do) and the senior loan does not, a Mortgagor may be more likely to repay sums due on the junior loan than those on the senior loan. Second, acts of the senior lender that prejudice the junior lender or impair the junior lender's security may create a superior equity in favor of the junior lender. For example, if the Mortgagor and the senior lender agree to an increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the extent any existing junior lender is harmed or the Mortgagor is additionally burdened. Third, if the Mortgagor defaults on the senior loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security available to the senior lender and can interfere with or delay the taking of action by the senior lender. Moreover, the bankruptcy of a junior lender may operate to stay foreclosure or similar proceedings by the senior lender. DEFAULT INTEREST, PREPAYMENT CHARGES AND PREPAYMENTS Forms of notes and mortgages used by lenders may contain provisions obligating the Mortgagor to pay a late charge or additional interest if payments are not timely made, and in some circumstances may provide for prepayment fees or yield maintenance penalties if the obligation is paid prior to maturity or prohibit such prepayment for a specified period. In certain states, there are or may be specific limitations upon the late charges which a lender may collect from a Mortgagor for delinquent payments. Certain states also limit the amounts that a lender may collect from a Mortgagor as an additional charge if the loan is prepaid. The enforceability, under the laws of a number of states of provisions providing for prepayment fees or penalties upon, or prohibition of, an involuntary prepayment is unclear, and no assurance can be given that, at the time a Prepayment Premium is required to be made on a Mortgage Loan in connection with an involuntary prepayment, the obligation to make such payment, or the provisions of any such prohibition, will be enforceable under applicable state law. The absence of a restraint on prepayment, particularly with respect to Mortgage Loans having higher Mortgage Interest Rates, may increase the likelihood of refinancing or other early retirements of the Mortgage Loans. ACCELERATION ON DEFAULT To the extent specified in the related Prospectus Supplement, some of the Mortgage Loans included in the Mortgage Pool for a Series will include a "debt-acceleration" clause, which permits the lender to accelerate the full debt upon a monetary or nonmonetary default of the Mortgagor. The courts of all states will enforce clauses providing for acceleration in the event of a material payment default after giving effect to any appropriate notices. The equity courts of the state, however, may refuse to foreclose a mortgage or deed of trust when an acceleration of the indebtedness would be inequitable or unjust or the circumstances would render the acceleration unconscionable. Furthermore, in some states, the Mortgagor may avoid foreclosure and reinstate an accelerated loan by paying only the defaulted amounts and the costs and attorneys' fees incurred by the lender in collecting such defaulted payments. APPLICABILITY OF USURY LAWS Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980, enacted in March 1980 ("TITLE V"), provides that state usury limitations shall not apply to certain types of residential (including multifamily but not other commercial) first mortgage loans originated by certain lenders after March 31, 1980. A similar federal statute was in effect with respect to mortgage loans made during the first three months of 1980. The statute authorized any state to reimpose interest rate limits by adopting, before April 1, 1983, a law or constitutional provision that expressly rejects application of the federal law. In addition, even where Title V is not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V. Certain states have taken action to reimpose interest rate limits and/or to limit discount points or other charges. The Depositor has been advised by counsel that a court interpreting Title V would hold that residential first mortgage loans that are originated on or after January 1, 1980 are subject to federal preemption. Therefore, in a state that has not taken the requisite action to reject application of Title V or to adopt a provision limiting discount points or other charges prior to origination of such mortgage loans, any such limitation under such state's usury law would not apply to such mortgage loans. In any state in which application of Title V has been expressly rejected or a provision limiting discount points or other charges is adopted, no Mortgage Loan originated after the date of such state action will be eligible for inclusion in a Trust Fund unless (i) such Mortgage Loan provides for such interest rate, discount points and charges as are - 61 - permitted in such state or (ii) such Mortgage Loan provides that the terms thereof shall be construed in accordance with the laws of another state under which such interest rate, discount points and charges would not be usurious and the Mortgagor's counsel has rendered an opinion that such choice of law provision would be given effect. Statutes differ in their provisions as to the consequences of a usurious loan. One group of statutes requires the lender to forfeit the interest due above the applicable limit or impose a specified penalty. Under this statutory scheme, the borrower may cancel the recorded mortgage or deed of trust upon paying its debt with lawful interest, and the lender may foreclose, but only for the debt plus lawful interest. A second group of statutes is more severe. A violation of this type of usury law results in the invalidation of the transaction, thereby permitting the borrower to cancel the recorded mortgage or deed of trust without any payment or prohibiting the lender from foreclosing. CERTAIN LAWS AND REGULATIONS; TYPES OF MORTGAGED PROPERTIES The Mortgaged Properties will be subject to compliance with various federal, state and local statutes and regulations. Failure to comply (together with an inability to remedy any such failure) could result in material diminution in the value of a Mortgage Property which could, together with the possibility of limited alternative uses for a particular Mortgaged Property (e.g., a nursing or convalescent home or hospital), result in a failure to realize the full principal amount of the related Mortgage Loan. Mortgages on Mortgaged Properties which are owned by the Mortgagor under a condominium form of ownership are subject to the declaration, by-laws and other rules and regulations of the condominium association. Mortgaged Properties which are hotels or motels may present additional risk in that hotels and motels are typically operated pursuant to franchise, management and operating agreements which may be terminable by the operator, and the transferability of the hotel's operating, liquor and other licenses to the entity acquiring the hotel either through purchases or foreclosure is subject to the vagaries of local law requirements. In addition, Mortgaged Properties which are multifamily residential properties may be subject to rent control laws, which could impact the future cash flows of such properties. AMERICANS WITH DISABILITIES ACT Under Title III of the Americans with Disabilities Act of 1990 and rules promulgated thereunder (collectively, the "ADA"), in order to protect individuals with disabilities, public accommodations (such as hotels, restaurants, shopping centers, hospitals, schools and social service center establishments) must remove architectural and communication barriers which are structural in nature from existing places of public accommodation to the extent "readily achievable." In addition, under the ADA, alterations to a place of public accommodation or a commercial facility are to be made so that, to the maximum extent feasible, such altered portions are readily accessible to and usable by disabled individuals. The "readily achievable" standard takes into account, among other factors, the financial resources of the affected site, owner, landlord or other applicable person. In addition to imposing a possible financial burden on the Mortgagor in its capacity as owner or landlord, the ADA may also impose such requirements on a foreclosing lender who succeeds to the interest of the Mortgagor as owner of landlord. Furthermore, since the "readily achievable" standard may vary depending on the financial condition of the owner or landlord, a foreclosing lender who is financially more capable than the Mortgagor of complying with the requirements of the ADA may be subject to more stringent requirements than those to which the Mortgagor is subject. SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940 Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the "RELIEF ACT"), a Mortgagor who enters military service after the origination of such Mortgagor's Mortgage Loan (including a Mortgagor who was in reserve status and is called to active duty after origination of the Mortgage Loan), may not be charged interest (including fees and charges) above an annual rate of 6% during the period of such Mortgagor's active duty status, unless a court orders otherwise upon application of the lender. The Relief Act applies to Mortgagors who are members of the Army, Navy, Air Force, Marines, National Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service assigned to duty with the military. Because the Relief Act applies to Mortgagors who enter military service (including reservists who are called to active duty) after origination of the related Mortgage Loan, no information can be provided as to the number of loans that may be affected by the Relief Act. Application of the Relief Act would adversely affect, for an indeterminate period of time, the ability of any servicer to collect full amounts of interest on certain of the Mortgage Loans. Any shortfalls in interest collections resulting from the application of the Relief Act would result in a reduction of the amounts distributable to the holders of the related Series of Certificates, and would not be covered by advances or, unless otherwise specified in the related Prospectus Supplement, any form of Credit Support provided in connection with such Certificates. In addition, the Relief Act imposes limitations that would impair the ability of the servicer to foreclose on an affected Mortgage Loan during the Mortgagor's period of active duty status, - 62 - and, under certain circumstances, during an additional three month period thereafter. Thus, in the event that such a Mortgage Loan goes into default, there may be delays and losses occasioned thereby. FORFEITURES IN DRUG AND RICO PROCEEDINGS Federal law provides that property owned by persons convicted of drug-related crimes or of criminal violations of the Racketeer Influenced and Corrupt Organizations ("RICO") statute can be seized by the government if the property was used in, or purchased with the proceeds of, such crimes. Under procedures contained in the Comprehensive Crime Control Act of 1984 (the "CRIME CONTROL ACT"), the government may seize the property even before conviction. The government must publish notice of the forfeiture proceeding and may give notice to all parties "known to have an alleged interest in the property," including the holders of mortgage loans. A lender may avoid forfeiture of its interest in the property if it establishes that: (i) its mortgage was executed and recorded before commission of the crime upon which the forfeiture is based, or (ii) the lender was, at the time of execution of the mortgage, "reasonably without cause to believe" that the property was used in, or purchased with the proceeds of, illegal drug or RICO activities. FEDERAL INCOME TAX CONSEQUENCES The following summary of the anticipated material federal income tax consequences of the purchase, ownership and disposition of Offered Certificates is based on the advice of Andrews & Kurth L.L.P., counsel to the Depositor. This summary is based on laws, regulations, including the REMIC regulations promulgated by the Treasury Department (the "REMIC REGULATIONS"), rulings and decisions now in effect or (with respect to regulations) proposed, all of which are subject to change either prospectively or retroactively. Andrews & Kurth L.L.P. will deliver an opinion to the Depositor that the information set forth under this caption, "Federal Income Tax Consequences," to the extent that it constitutes matters of law or legal conclusions, is correct in all material respects. This summary does not address the federal income tax consequences of an investment in Certificates applicable to all categories of investors, some of which (for example, banks and insurance companies) may be subject to special rules. Prospective investors should consult their tax advisors regarding the federal, state, local and any other tax consequences to them of the purchase, ownership and disposition of Certificates. GENERAL The federal income tax consequences to Certificateholders will vary depending on whether an election is made to treat the Trust Fund, or a segregated portion thereof, relating to a particular Series of Certificates as a REMIC under the Code. The Prospectus Supplement for each Series of Certificates will specify whether a REMIC election will be made. GRANTOR TRUST FUNDS If a REMIC election is not made, Andrews & Kurth L.L.P. will deliver its opinion that the Trust Fund will not be classified as an association taxable as a corporation and that each such Trust Fund will be classified as a grantor trust under subpart E, Part I of subchapter J of Chapter 1 of Subtitle A of the Code. In this case, owners of Certificates will be treated for federal income tax purposes as owners of a portion of the Trust Fund's assets as described below. A. SINGLE CLASS OF GRANTOR TRUST CERTIFICATES CHARACTERIZATION. The Trust Fund may be created with one class of Grantor Trust Certificates. In this case, each Grantor Trust Certificateholder will be treated as the owner of a pro rata undivided interest in the interest and principal portions of the Trust Fund represented by the Grantor Trust Certificates and will be considered the equitable owner of a pro rata undivided interest in each of the Mortgage Assets in the Pool. Any amounts received by a Grantor Trust Certificateholder in lieu of amounts due with respect to any Mortgage Asset because of a default or delinquency in payment will be treated for federal income tax purposes as having the same character as the payments they replace. Each Grantor Trust Certificateholder will be required to report on its federal income tax return in accordance with such Grantor Trust Certificateholder's method of accounting its pro rata share of the entire income from the Mortgage Loans in the Trust Fund represented by Grantor Trust Certificates, including interest, original issue discount ("OID"), if any, prepayment fees, assumption fees, any gain recognized upon an assumption and late payment charges - 63 - received by the Master Servicer. Under Code Sections 162 or 212 each Grantor Trust Certificateholder will be entitled to deduct its pro rata share of servicing fees, prepayment fees, assumption fees, any loss recognized upon an assumption and late payment charges retained by the Master Servicer, provided that such amounts are reasonable compensation for services rendered to the Trust Fund. Grantor Trust Certificateholders that are individuals, estates or trusts will be entitled to deduct their share of expenses as itemized deductions only to the extent such expenses plus all other Code Section 212 expenses exceed two percent of their adjusted gross income. In addition, the amount of itemized deductions otherwise allowable for the taxable year for an individual whose adjusted gross income exceeds the applicable amount under Code Section 68(b) (which amount will be adjusted for inflation) will be reduced by the lesser of (i) 3% of the excess of adjusted gross income over the applicable amount or (ii) 80% of the amount of itemized deductions otherwise allowable for such taxable year. A Grantor Trust Certificateholder using the cash method of accounting must take into account its pro rata share of income and deductions as and when collected by or paid to the Master Servicer. A Grantor Trust Certificateholder using an accrual method of accounting must take into account its pro rata share of income and deductions as they become due or are paid to the Master Servicer, whichever is earlier. If the servicing fees paid to the Master Servicer are deemed to exceed reasonable servicing compensation, the amount of such excess could be considered as an ownership interest retained by the Master Servicer (or any person to whom the Master Servicer assigned for value all or a portion of the servicing fees) in a portion of the interest payments on the Mortgage Assets. The Mortgage Assets would then be subject to the "coupon stripping" rules of the Code discussed below. Unless otherwise specified in the related Prospectus Supplement, as to each Series of Certificates Andrews & Kurth L.L.P. will have advised the Depositor that, except as described below under "b. Multiple Classes of Grantor Trust Certificates -- Treatment of Certain Owners": (i) a Grantor Trust Certificate owned by a "domestic building and loan association" within the meaning of Code Section 7701(a)(19) representing principal and interest payments on Mortgage Assets will be considered to represent "loans . . . secured by an interest in real property which is . . . residential property" within the meaning of Code Section 7701(a)(19)(C)(v), to the extent that the Mortgage Assets represented by that Grantor Trust Certificate are of a type described in such Code section; (ii) a Grantor Trust Certificate owned by a real estate investment trust representing an interest in Mortgage Assets will be considered to represent "real estate assets" within the meaning of Code Section 856(c)(5)(A), and interest income on the Mortgage Assets will be considered "interest on obligations secured by mortgages on real property" within the meaning of Code Section 856(c)(3)(B), to the extent that the Mortgage Assets represented by that Grantor Trust Certificate are of a type described in such Code section; and (iii) a Grantor Trust Certificate owned by a REMIC will represent "obligation[s] . . . which [are] principally secured by an interest in real property" within the meaning of Code Section 860G(a)(3). STRIPPED BONDS AND COUPONS. Certain Trust Funds may consist of Government Securities which constitute "stripped bonds" or "stripped coupons" as those terms are defined in Section 1286 of the Code, and, as a result, such assets would be subject to the stripped bond provisions of the Code. Under these rules, such Government Securities are treated as having OID based on the purchase price and the stated redemption price at maturity of each Government Security. As such, Grantor Trust Certificateholders would be required to include in income their pro rata share of the OID on each Government Security recognized in any given year on an economic accrual basis even if the Grantor Trust Certificateholder is a cash method taxpayer. Accordingly, the sum of the income includible to the Grantor Trust Certificateholder in any taxable year may exceed amounts actually received during such year. PREMIUM. The price paid for a Grantor Trust Certificate by a holder will be allocated to such holder's undivided interest in each Mortgage Asset based on each Mortgage Asset's relative fair market value, so that such holder's undivided interest in each Mortgage Asset will have its own tax basis. A Grantor Trust Certificateholder that acquires an interest in Mortgage Assets at a premium may elect to amortize such premium under a constant interest method, provided that the underlying mortgage loans with respect to such Mortgage Assets were originated after September 27, 1985. Premium allocable to mortgage loans originated on or before September 27, 1985 should be allocated among the principal payments on such mortgage loans and allowed as an ordinary deduction as principal payments are made. Amortizable bond premium will be treated as an offset to interest income on such Grantor Trust Certificate. The basis for such Grantor Trust Certificate will be reduced to the extent that amortizable premium is applied to offset interest payments. It is not clear whether a reasonable prepayment assumption should be used in computing amortization of premium allowable under Code Section 171. A Certificateholder that makes this election for a Certificate that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that such Certificateholder holds during the year of the election or thereafter. - 64 - If a premium is not subject to amortization using a reasonable prepayment assumption, the holder of a Grantor Trust Certificate acquired at a premium should recognize a loss if a Mortgage Loan (or an underlying mortgage loan with respect to a Mortgage Asset) prepays in full, equal to the difference between the portion of the prepaid principal amount of such Mortgage Loan (or underlying mortgage loan) that is allocable to the Certificate and the portion of the adjusted basis of the Certificate that is allocable to such Mortgage Loan (or underlying mortgage loan). If a reasonable prepayment assumption is used to amortize such premium, it appears that such a loss would be available, if at all, only if prepayments have occurred at a rate faster than the reasonable assumed prepayment rate. It is not clear whether any other adjustments would be required to reflect differences between an assumed prepayment rate and the actual rate of prepayments. ORIGINAL ISSUE DISCOUNT. The Internal Revenue Service (the "IRS") has stated in published rulings that, in circumstances similar to those described herein, the special rules of the Code relating to OID (currently Code Sections 1271 through 1273 and 1275) and Treasury regulations issued on January 27, 1994, as amended on June 14, 1996, under such Sections (the "OID REGULATIONS"), will be applicable to a Grantor Trust Certificateholder's interest in those Mortgage Assets meeting the conditions necessary for these sections to apply. Rules regarding periodic inclusion of OID income are applicable to mortgages of corporations originated after May 27, 1969, mortgages of noncorporate Mortgagors (other than individuals) originated after July 1, 1982, and mortgages of individuals originated after March 1, 1984. Such OID could arise by the financing of points or other charges by the originator of the mortgages in an amount greater than a statutory DE MINIMIS exception to the extent that the points are not currently deductible under applicable Code provisions or are not for services provided by the lender. OID generally must be reported as ordinary gross income as it accrues under a constant interest method. See "--Grantor Trust Funds -- Multiple Classes of Grantor Trust Certificates -- Accrual of Original Issue Discount" below. MARKET DISCOUNT. A Grantor Trust Certificateholder that acquires an undivided interest in Mortgage Assets may be subject to the market discount rules of Code Sections 1276 through 1278 to the extent an undivided interest in a Mortgage Asset is considered to have been purchased at a "market discount." Generally, the amount of market discount is equal to the excess of the portion of the principal amount of such Mortgage Asset allocable to such holder's undivided interest over such holder's tax basis in such interest. Market discount with respect to a Grantor Trust Certificate will be considered to be zero if the amount allocable to the Grantor Trust Certificate is less than 0.25% of the Grantor Trust Certificate's stated redemption price at maturity multiplied by the weighted average maturity remaining after the date of purchase. Treasury regulations implementing the market discount rules have not yet been issued; therefore, investors should consult their own tax advisors regarding the application of these rules and the advisability of making any of the elections allowed under Code Sections 1276 through 1278. The Code provides that any principal payment (whether a scheduled payment or a prepayment) or any gain on disposition of a market discount bond acquired by the taxpayer after October 22, 1986 shall be treated as ordinary income to the extent that it does not exceed the accrued market discount at the time of such payment. The amount of accrued market discount for purposes of determining the tax treatment of subsequent principal payments or dispositions of the market discount bond is to be reduced by the amount so treated as ordinary income. The Code also grants the Treasury Department authority to issue regulations providing for the computation of accrued market discount on debt instruments, the principal of which is payable in more than one installment. While the Treasury Department has not yet issued regulations, rules described in the relevant legislative history will apply. Under those rules, the holder of a market discount bond may elect to accrue market discount either on the basis of a constant interest rate or according to one of the following methods. If a Grantor Trust Certificate is issued with OID, the amount of market discount that accrues during any accrual period would be equal to the product of (i) the total remaining market discount and (ii) a fraction, the numerator of which is the OID accruing during the period and the denominator of which is the total remaining OID at the beginning of the accrual period. For Grantor Trust Certificates issued without OID, the amount of market discount that accrues during a period is equal to the product of (i) the total remaining market discount and (ii) a fraction, the numerator of which is the amount of stated interest paid during the accrual period and the denominator of which is the total amount of stated interest remaining to be paid at the beginning of the accrual period. For purposes of calculating market discount under any of the above methods in the case of instruments (such as the Grantor Trust Certificates) that provide for payments that may be accelerated by reason of prepayments of other obligations securing such instruments, the same prepayment assumption applicable to calculating the accrual of OID will apply. Because the regulations described above have not been issued, it is impossible to predict what effect those regulations might have on the tax treatment of a Grantor Trust Certificate purchased at a discount or premium in the secondary market. A holder who acquired a Grantor Trust Certificate at a market discount also may be required to defer a portion of the excess of the interest paid or incurred for the taxable year attributable to any indebtedness incurred or continued - 65 - to purchase or carry such Grantor Trust Certificate purchased with market discount over the interest distributable thereon. For these purposes, the DE MINIMIS rule referred to above applies. Any such deferred excess interest expense would not exceed the market discount that accrues during such taxable year and is, in general, allowed as a deduction not later than the year in which such market discount is includible in income. The amount of any remaining deferred deduction is to be taken into account in the taxable year in which the Grantor Trust Certificate matures or is disposed of in a taxable transaction. In the case of a disposition in which gain or loss is not recognized in whole or in part, any remaining deferred deduction will be allowed to the extent of gain recognized on the disposition. If such holder elects to include market discount in income currently as it accrues on all market discount instruments acquired by such holder in that taxable year or thereafter, the interest deferral rule described above will not apply. ELECTION TO TREAT ALL INTEREST AS OID. The OID Regulations permit a Certificateholder to elect to accrue all interest, discount (including DE MINIMIS market or OID) and premium in income as interest, based on a constant yield method. If such an election were to be made with respect to a Grantor Trust Certificate with market discount, the Certificateholder would be deemed to have made an election to include in income currently market discount with respect to all other debt instruments having market discount that such Certificateholder acquires during the year of the election or thereafter. Similarly, a Certificateholder that makes this election for a Certificate that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that such Certificateholder owns or acquires. See "--Grantor Trust Funds - -- Single Class of Grantor Trust Certificates -- Premium." The election to accrue interest, discount and premium on a constant yield method with respect to a Certificate is irrevocable except with the approval of the IRS. B. MULTIPLE CLASSES OF GRANTOR TRUST CERTIFICATES STRIPPED BONDS AND STRIPPED COUPONS Pursuant to Code Section 1286, the separation of ownership of the right to receive some or all of the interest payments on an obligation from ownership of the right to receive some or all of the principal payments results in the creation of "stripped bonds" with respect to principal payments and "stripped coupons" with respect to interest payments. For purposes of Code Sections 1271 through 1288, Code Section 1286 treats a stripped bond or a stripped coupon as an obligation issued on the date that such stripped interest is created. If a Trust Fund is created with two classes of Grantor Trust Certificates, one class of Grantor Trust Certificates may represent the right to principal and interest, or principal only, on all or a portion of the Mortgage Assets (the "STRIPPED BOND CERTIFICATES"), while the second class of Grantor Trust Certificates may represent the right to some or all of the interest on such portion (the "STRIPPED COUPON CERTIFICATES"). Servicing fees in excess of reasonable servicing fees ("excess servicing") will be treated under the stripped bond rules. If the excess servicing fee is less than 100 basis points (i.e., 1% interest on the Mortgage Asset principal balance) or the Certificates are initially sold with a DE MINIMIS discount (assuming no prepayment assumption is required), any non DE MINIMIS discount arising from a subsequent transfer of the Certificates should be treated as market discount. The IRS appears to require that reasonable servicing fees be calculated on a Mortgage Asset by Mortgage Asset basis, which could result in some Mortgage Assets being treated as having more than 100 basis points of interest stripped off. Although not entirely clear, a Stripped Bond Certificate generally should be treated as an interest in Mortgage Assets issued on the day such Certificate is purchased for purposes of calculating any OID. Generally, if the discount on a Mortgage Asset is larger than a DE MINIMIS amount (as calculated for purposes of the OID rules) a purchaser of such a Certificate will be required to accrue the discount under the OID rules of the Code. See "--Grantor Trust Funds -- Single Class of Grantor Trust Certificates -- Original Issue Discount." However, a purchaser of a Stripped Bond Certificate will be required to account for any discount on the Mortgage Assets as market discount rather than OID if either (i) the amount of OID with respect to the Mortgage Assets is treated as zero under the OID DE MINIMIS rule when the Certificate was stripped or (ii) no more than 100 basis points (including any amount of servicing fees in excess of reasonable servicing fees) is stripped off of the Trust Fund's Mortgage Assets. The precise tax treatment of Stripped Coupon Certificates is substantially uncertain. The Code could be read literally to require that OID computations be made for each payment from each Mortgage Asset. However, based on the recent IRS guidance, it appears that all payments from a Mortgage Asset underlying a Stripped Coupon Certificate should be treated as a single installment obligation subject to the OID rules of the Code, in which case, all payments from such Mortgage Asset would be included in the Mortgage Asset's stated redemption price at maturity for purposes of calculating income on such certificate under the OID rules of the Code. - 66 - It is unclear under what circumstances, if any, the prepayment of Mortgage Assets will give rise to a loss to the holder of a Stripped Bond Certificate purchased at a premium or a Stripped Coupon Certificate. If such Certificate is treated as a single instrument (rather than an interest in discrete mortgage loans) and the effect of prepayments is taken into account in computing yield with respect to such Grantor Trust Certificate, it appears that no loss will be available as a result of any particular prepayment unless prepayments occur at a rate faster than the assumed prepayment rate. However, if such Certificate is treated as an interest in discrete Mortgage Assets, or if no prepayment assumption is used, then when a Mortgage Asset is prepaid, the holder of such Certificate should be able to recognize a loss equal to the portion of the adjusted issue price of such Certificate that is allocable to such Mortgage Asset. Holders of Stripped Bond Certificates and Stripped Coupon Certificates are urged to consult with their own tax advisors regarding the proper treatment of these Certificates for federal income tax purposes. TREATMENT OF CERTAIN OWNERS Several Code sections provide beneficial treatment to certain taxpayers that invest in Mortgage Assets of the type that make up the Trust Fund. With respect to these Code sections, no specific legal authority exists regarding whether the character of the Grantor Trust Certificates, for federal income tax purposes, will be the same as that of the underlying Mortgage Assets. While Code Section 1286 treats a stripped obligation as a separate obligation for purposes of the Code provisions addressing OID, it is not clear whether such characterization would apply with regard to these other Code sections. Although the issue is not free from doubt, based on policy considerations, each class of Grantor Trust Certificates, unless otherwise specified in the related Prospectus Supplement, should be considered to represent "real estate assets" within the meaning of Code Section 856(c)(6)(B) and "loans . . . secured by an interest in real property which is . . . residential real property" within the meaning of Code Section 7701(a)(19)(C)(v), and interest income attributable to Grantor Trust Certificates should be considered to represent "interest on obligations secured by mortgages on real property" within the meaning of Code Section 856(c)(3)(B), provided that in each case the underlying Mortgage Assets and interest on such Mortgage Assets qualify for such treatment. Prospective purchasers to which such characterization of an investment in Certificates is material should consult their own tax advisors regarding the characterization of the Grantor Trust Certificates and the income therefrom. Grantor Trust Certificates will be "obligation[s] . . . which [are] principally secured by an interest in real property" within the meaning of Code Section 860G(a)(3). GRANTOR TRUST CERTIFICATES REPRESENTING INTERESTS IN LOANS OTHER THAN ARM LOANS The OID rules of Code Sections 1271 through 1275 will be applicable to a Certificateholder's interest in those Mortgage Assets as to which the conditions for the application of those sections are met. Rules regarding periodic inclusion of OID in income are applicable to mortgages of corporations originated after May 27, 1969, mortgages of noncorporate Mortgagors (other than individuals) originated after July 1, 1982, and mortgages of individuals originated after March 1, 1984. Under the OID Regulations, such OID could arise by the charging of points by the originator of the mortgage in an amount greater than the statutory DE MINIMIS exception, including a payment of points that is currently deductible by the borrower under applicable Code provisions, or under certain circumstances, by the presence of "teaser" rates on the Mortgage Assets. OID on each Grantor Trust Certificate must be included in the owner's ordinary income for federal income tax purposes as it accrues, in accordance with a constant interest method that takes into account the compounding of interest, in advance of receipt of the cash attributable to such income. The amount of OID required to be included in an owner's income in any taxable year with respect to a Grantor Trust Certificate representing an interest in Mortgage Assets other than Mortgage Assets with interest rates that adjust periodically ("ARM LOANS") likely will be computed as described below under "--Accrual of Original Issue Discount." The following discussion is based in part on the OID Regulations and in part on the provisions of the Tax Reform Act of 1986 (the "1986 ACT"). The OID Regulations generally are effective for debt instruments issued on or after April 4, 1994, but may be relied upon as authority with respect to debt instruments, such as the Grantor Trust Certificates, issued after December 21, 1992. Alternatively, proposed Treasury regulations issued December 21, 1992 may be treated as authority for debt instruments issued after December 21, 1992 and prior to April 4, 1994, and proposed Treasury regulations issued in 1986 and 1991 may be treated as authority for instruments issued before December 21, 1992. In applying these dates, the issue date of the Mortgage Assets should be used, or, in the case of Stripped Bond Certificates or Stripped Coupon Certificates, the date such Certificates are acquired. The holder of a Certificate should be aware, however, that neither the proposed OID Regulations nor the OID Regulations adequately address certain issues relevant to prepayable securities. Under the Code, the Mortgage Assets underlying the Grantor Trust Certificate will be treated as having been issued on the date they were originated with an amount of OID equal to the excess of such Mortgage Asset's stated redemption price at maturity over its issue price. The issue price of a Mortgage Asset is generally the amount lent to the - 67 - mortgagee, which may be adjusted to take into account certain loan origination fees. The stated redemption price at maturity of a Mortgage Asset is the sum of all payments to be made on such Mortgage Asset other than payments that are treated as qualified stated interest payments. The accrual of this OID, as described below under "--Accrual of Original Issue Discount," will, unless otherwise specified in the related Prospectus Supplement, utilize the original yield to maturity of the Grantor Trust Certificate calculated based on a reasonable assumed prepayment rate for the mortgage loans underlying the Grantor Trust Certificates (the "PREPAYMENT ASSUMPTION"), and will take into account events that occur during the calculation period. The Prepayment Assumption will be determined in the manner prescribed by regulations that have not yet been issued. The legislative history of the 1986 Act (the "LEGISLATIVE HISTORY") provides, however, that the regulations will require that the Prepayment Assumption be the prepayment assumption that is used in determining the offering price of such Certificate. No representation is made that any Certificate will prepay at the Prepayment Assumption or at any other rate. The prepayment assumption contained in the Code literally only applies to debt instruments collateralized by other debt instruments that are subject to prepayment rather than direct ownership interests in such debt instruments, such as the Certificates represent. However, no other legal authority provides guidance with regard to the proper method for accruing OID on obligations that are subject to prepayment, and, until further guidance is issued, the Master Servicer intends to calculate and report OID under the method described below. ACCRUAL OF ORIGINAL ISSUE DISCOUNT Generally, the owner of a Grantor Trust Certificate must include in gross income the sum of the "daily portions," as defined below, of the OID on such Grantor Trust Certificate for each day on which it owns such Certificate, including the date of purchase but excluding the date of disposition. In the case of an original owner, the daily portions of OID with respect to each component generally will be determined as set forth under the OID Regulations. A calculation will be made by the Master Servicer or such other entity specified in the related Prospectus Supplement of the portion of OID that accrues during each successive monthly accrual period (or shorter period from the date of original issue) that ends on the day in the calendar year corresponding to each of the Distribution Dates on the Grantor Trust Certificates (or the day prior to each such date). This will be done, in the case of each full month accrual period, by (i) adding (a) the present value at the end of the accrual period (determined by using as a discount factor the original yield to maturity of the respective component under the Prepayment Assumption) of all remaining payments to be received under the Prepayment Assumption on the respective component and (b) any payments included in the stated redemption price at maturity received during such accrual period, and (ii) subtracting from that total the "adjusted issue price" of the respective component at the beginning of such accrual period. The adjusted issue price of a Grantor Trust Certificate at the beginning of the first accrual period is its issue price; the adjusted issue price of a Grantor Trust Certificate at the beginning of a subsequent accrual period is the adjusted issue price at the beginning of the immediately preceding accrual period plus the amount of OID allocable to that accrual period reduced by the amount of any payment other than a payment of qualified stated interest made at the end of or during that accrual period. The OID accruing during such accrual period will then be divided by the number of days in the period to determine the daily portion of OID for each day in the period. With respect to an initial accrual period shorter than a full monthly accrual period, the daily portions of OID must be determined according to an appropriate allocation under any reasonable method. OID generally must be reported as ordinary gross income as it accrues under a constant interest method that takes into account the compounding of interest as it accrues rather than when received. However, the amount of OID includible in the income of a holder of an obligation is reduced when the obligation is acquired after its initial issuance at a price greater than the sum of the original issue price and the previously accrued OID, less prior payments of principal. Accordingly, if such Mortgage Assets acquired by a Certificateholder are purchased at a price equal to the then unpaid principal amount of such Mortgage Asset, no OID attributable to the difference between the issue price and the original principal amount of such Mortgage Asset (i.e., points) will be includible by such holder. Other OID on the Mortgage Assets (e.g., that arising from a "teaser" rate) would still need to be accrued. GRANTOR TRUST CERTIFICATES REPRESENTING INTERESTS IN ARM LOANS The OID Regulations do not address the treatment of instruments, such as the Grantor Trust Certificates, which represent interests in ARM Loans. Additionally, the IRS has not issued guidance under the Code's coupon stripping rules with respect to such instruments. In the absence of any authority, the Master Servicer will report OID on Grantor Trust Certificates attributable to ARM Loans ("STRIPPED ARM OBLIGATIONS") to holders in a manner it believes is consistent with the rules described above under "--Grantor Trust Funds -- Multiple Classes of Grantor Trust Certificates -- Grantor Trust Certificates Representing Interests in Loans Other Than ARM Loans" and with the OID Regulations. In general, application of these rules may require inclusion of income on a Stripped ARM Obligation in advance of the receipt of cash attributable to such income. Further, the addition of interest deferred by reason of negative amortization ("DEFERRED INTEREST") to the principal balance of an ARM Loan may require the inclusion of such amount - 68 - in the income of the Grantor Trust Certificateholder when such amount accrues. Furthermore, the addition of Deferred Interest to the Grantor Trust Certificate's principal balance will result in additional income (including possibly OID income) to the Grantor Trust Certificateholder over the remaining life of such Grantor Trust Certificates. Because the treatment of Stripped ARM Obligations is uncertain, investors are urged to consult their tax advisors regarding how income will be includible with respect to such Certificates. C. SALE OR EXCHANGE OF A GRANTOR TRUST CERTIFICATE Sale or exchange of a Grantor Trust Certificate prior to its maturity will result in gain or loss equal to the difference, if any, between the amount received and the owner's adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally will equal the seller's purchase price for the Grantor Trust Certificate, increased by the OID included in the seller's gross income with respect to the Grantor Trust Certificate, and reduced by principal payments on the Grantor Trust Certificate previously received by the seller. Such gain or loss will be capital gain or loss to an owner for which a Grantor Trust Certificate is a "capital asset" within the meaning of Code Section 1221, and will be long-term or short-term depending on whether the Grantor Trust Certificate has been owned for the long-term capital gain holding period. For noncorporate taxpayers, different tax rates apply to long-term capital gains depending on the type of assets, whether the assets have been held for more than one year or more than eighteen months and the maximum ordinary income tax rate applicable to the taxpayer's income. Grantor Trust Certificates will be "evidences of indebtedness" within the meaning of Code Section 582(c)(1), so that gain or loss recognized from the sale of a Grantor Trust Certificate by a bank or a thrift institution to which such section applies will be treated as ordinary income or loss. D. NON-U.S. PERSONS Generally, to the extent that a Grantor Trust Certificate evidences ownership in underlying Mortgage Assets that were issued on or before July 18, 1984, interest or OID paid by the person required to withhold tax under Code Section 1441 or 1442 to (i) an owner that is not a U.S. Person (as defined below) or (ii) a Grantor Trust Certificateholder holding on behalf of an owner that is not a U.S. Person will be subject to federal income tax, collected by withholding, at a rate of 30% or such lower rate as may be provided for interest by an applicable tax treaty. Accrued OID recognized by the owner on the sale or exchange of such a Grantor Trust Certificate also will be subject to federal income tax at the same rate. Generally, such payments would not be subject to withholding to the extent that a Grantor Trust Certificate evidences ownership in Mortgage Assets issued after July 18, 1984, by natural persons if such Grantor Trust Certificateholder complies with certain identification requirements (including delivery of a statement, signed by the Grantor Trust Certificateholder under penalties of perjury, certifying that such Grantor Trust Certificateholder is not a U.S. Person and providing the name and address of such Grantor Trust Certificateholder). Additional restrictions apply to Mortgage Assets where the Mortgagor is not a natural person in order to qualify for the exemption from withholding. As used herein, a "U.S. PERSON" means (i) a citizen or resident of the United States, (ii) a corporation or a partnership (including an entity treated as a corporation or a partnership for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof (unless, in the case of a partnership, Treasury regulations are adopted that provide otherwise), (iii) an estate, the income of which from sources outside the United States is includible in gross income for federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have authority to control all substantial decisions of the trust. Final regulations dealing with withholding tax on income paid to foreign persons and related matters (the "New Withholding Regulations") were issued by the Treasury Department on October 6, 1997. The New Withholding Regulations will generally be effective for payments made after December 31, 1998, subject to certain transition rules. Non-U.S. Persons are strongly urged to consult their own tax advisors with respect to the New Withholding Regulations. E. INFORMATION REPORTING AND BACKUP WITHHOLDING The Master Servicer or Trustee will furnish or make available, within a reasonable time after the end of each calendar year, to each person who was a Certificateholder at any time during such year, such information as may be deemed necessary or desirable to assist Certificateholders in preparing their federal income tax returns, or to enable holders to make such information available to beneficial owners or financial intermediaries that hold such Certificates as nominees on behalf of beneficial owners. If a holder, beneficial owner, financial intermediary or other recipient of - 69 - a payment on behalf of a beneficial owner fails to supply a certified taxpayer identification number or if the Secretary of the Treasury determines that such person has not reported all interest and dividend income required to be shown on its federal income tax return, 31% backup withholding may be required with respect to any payments. Any amounts deducted and withheld from a distribution to a recipient would be allowed as a credit against such recipient's federal income tax liability. REMICS The Trust Fund relating to a Series of Certificates may elect to be treated as one or more REMICs. Qualification as a REMIC requires ongoing compliance with certain conditions. The REMIC must fulfill an asset test, which requires that no more than a de minimis amount of the assets of the REMIC, as of the close of the third calendar month beginning after the "STARTUP DAY" (which for purposes of this discussion is the date of issuance of the Certificates by the REMIC (the "REMIC CERTIFICATES") and at all times thereafter, may consist of assets other than "qualified mortgages" and "permitted investments." The REMIC Regulations provide a "safe harbor" pursuant to which the de minimis requirement will be met if at all times the aggregate adjusted basis of any nonqualified assets (i.e., assets other than qualified mortgages and permitted investments) is less than 1% of the aggregate adjusted basis of all the REMIC's assets. Although a REMIC is not generally subject to federal income tax (see, however "--REMICs --Taxation of Owners of REMIC Residual Certificates" and "--Prohibited Transactions and Other Taxes" below), if a Trust Fund with respect to which a REMIC election is made fails to comply with one or more of the ongoing requirements of the Code for REMIC status during any taxable year, including the implementation of restrictions on the purchase and transfer of the residual interests in a REMIC as described below under "--REMICs -- Taxation of Owners of REMIC Residual Certificates," the Code provides that a Trust Fund will not be treated as a REMIC for such year and thereafter. In that event, the classification of the REMIC for federal income tax purposes is uncertain. The REMIC might be entitled to treatment as a grantor trust under the rules described above under "--Grantor Trust Funds". In that case, no entity-level tax would be imposed on the REMIC. Alternatively, the REMIC Regular Certificates may continue to be treated as debt instruments for federal income tax purposes; but the REMIC pool could be treated as a taxable mortgage pool (a "TMP"). If the REMIC is treated as a TMP, any residual income of the REMIC (i.e., income from the Mortgage Loans less interest and OID expense allocable to the REMIC Regular Certificates and any administrative expenses of the REMIC) would be subject to corporate income tax at the REMIC level. If such entity is taxable as a separate corporation, the related Certificates may not be accorded the status or given the tax treatment described below. While the Code authorizes the Treasury Department to issue regulations providing relief in the event of an inadvertent termination of the status of a trust fund as a REMIC, no such regulations have been issued. Any such relief, moreover, may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the REMIC's income for the period in which the requirements for such status are not satisfied. With respect to each Trust Fund that elects REMIC status, Andrews & Kurth L.L.P. will deliver its opinion generally to the effect that, under then existing law and assuming compliance with all provisions of the related Pooling and Servicing Agreement, such Trust Fund will qualify as a REMIC, and the related Certificates will be considered to be REMIC Regular Certificates or REMIC Residual Certificates in the REMIC. The related Prospectus Supplement for each Series of Certificates will indicate whether the Trust Fund will make a REMIC election and whether a class of Certificates will be treated as a regular or residual interest in the REMIC. A "qualified mortgage" for REMIC purposes is any obligation (including certificates of participation in such an obligation) that is principally secured by an interest in real property and that is transferred to the REMIC within a prescribed time period in exchange for regular or residual interests in the REMIC. In general, with respect to each Series of Certificates for which a REMIC election is made, (i) Certificates held by a thrift institution taxed as a "domestic building and loan association" will constitute assets described in Code Section 7701(a)(19)(C); (ii) Certificates held by a real estate investment trust will constitute "real estate assets" within the meaning of Code Section 856(c)(6)(B); and (iii) interest on Certificates held by a real estate investment trust will be considered "interest on obligations secured by mortgages on real property" within the meaning of Code Section 856(c)(3)(B). If less than 95% of the REMIC's assets are assets qualifying under any of the foregoing Code sections, the Certificates will be qualifying assets only to the extent that the REMIC's assets are qualifying assets. In addition, payments on Mortgage Assets held pending distribution on the REMIC Certificates will be considered to be "real estate assets" for purposes of Code Section 856(c). TIERED REMIC STRUCTURES. For certain Series of Certificates, two separate elections may be made to treat designated portions of the related Trust Fund as REMICs (respectively, the "SUBSIDIARY REMIC" and the "MASTER REMIC") for federal income tax purposes. Upon the issuance of any such Series of Certificates, Andrews & Kurth L.L.P., counsel to the Depositor, will deliver its opinion generally to the effect that, assuming compliance with all provisions of the related Agreement, the Master REMIC as well as any Subsidiary REMIC will each qualify as a - 70 - REMIC, and the REMIC Certificates issued by the Master REMIC and the Subsidiary REMIC, respectively, will be considered to evidence ownership of REMIC Regular Certificates or REMIC Residual Certificates in the related REMIC within the meaning of the REMIC provisions. Only REMIC Certificates, other than the residual interest in the Subsidiary REMIC, issued by the Master REMIC will be offered hereunder. The Subsidiary REMIC and the Master REMIC will be treated as one REMIC solely for purposes of determining whether the REMIC Certificates will be (i)"real estate assets" within the meaning of Section 856(c)(6)(B) of the Code; (ii) "loans secured by an interest in real property" under Section 7701(a)(19)(C) of the Code; and (iii) whether the income on such Certificates is interest described in Section 856(c)(3)(B) of the Code. Moreover, the REMIC Regulations provide that, for purposes of Code Section 856(c)(5)(A), payments of principal and interest on the mortgage loans that are reinvested pending distribution to holders of REMIC Certificates constitute qualifying assets for such entities. Where two REMIC Pools are part of a tiered structure they will be treated as one REMIC for purposes of the test described above respecting asset ownership of more or less than 95%. Notwithstanding the foregoing, however, REMIC income received by a real estate investment trust ("REIT") owning a residual interest in a REMIC could be treated in part as non-qualifying REIT income if the REMIC holds mortgage loans with respect to which income is contingent on mortgagor profits or property appreciation. In addition, if the assets of the REMIC include buy-own mortgage loans, it is possible that the percentage of such assets constituting "qualifying real property loans" or "loans . . . secured by an interest in real property" for purposes of Code Section 7701(a)(19)(C)(v), may be required to be reduced by the amount of the related buy-down funds. REMIC Certificates held by a regulated investment company will not constitute "government securities" within the meaning of Code Section 851(b)(4)(A)(i). REMIC Certificates held by certain financial institutions will constitute an "evidence of indebtedness" within the meaning of Code Section 582(c)(1). However, REMIC Regular Certificates acquired by another REMIC on its Startup Day in exchange for regular or residual interests in the REMIC will constitute "qualified mortgages" within the meaning of Code Section 860G(a)(3). A. TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES GENERAL. Except as otherwise stated in this discussion, REMIC Regular Certificates will be treated for federal income tax purposes as debt instruments issued by the REMIC and not as ownership interests in the REMIC or its assets. In general, interest and OID on a REMIC Regular Certificate will be treated as ordinary income to a holder of the REMIC Regular Certificate (a "REMIC REGULAR CERTIFICATEHOLDER") as they accrue, and principal payments on a REMIC Regular Certificate will be treated as a return of capital to the extent of the REMIC Regular Certificateholder's basis in the REMIC Regular Certificate allocable thereto. Moreover, holders of REMIC Regular Certificates that otherwise report income under a cash method of accounting will be required to report income with respect to REMIC Regular Certificates under an accrual method. ORIGINAL ISSUE DISCOUNT AND PREMIUM. The REMIC Regular Certificates may be issued with OID. Generally, such OID, if any, will equal the difference between the "stated redemption price at maturity" of a REMIC Regular Certificate and its "issue price." Holders of any class of Certificates issued with OID will be required to include such OID in gross income for federal income tax purposes as it accrues, in accordance with a constant interest method based on the compounding of interest as it accrues rather than in accordance with receipt of the interest payments. The following discussion is based in part on the OID Regulations and in part on the provisions of the 1986 Act. REMIC Regular Certificateholders should be aware, however, that the OID Regulations do not adequately address certain issues relevant to prepayable securities, such as the REMIC Regular Certificates. Rules governing OID are set forth in Code Sections 1271 through 1273 and 1275. These rules require that the amount and rate of accrual of OID be calculated based on the Prepayment Assumption and the anticipated reinvestment rate, if any, relating to the REMIC Regular Certificates and prescribe a method for adjusting the amount and rate of accrual of such discount where the actual prepayment rate differs from the Prepayment Assumption. Under the Code, the Prepayment Assumption must be determined in the manner prescribed by regulations, which regulations have not yet been issued. The Legislative History provides, however, that Congress intended the regulations to require that the Prepayment Assumption be the prepayment assumption that is used in determining the initial offering price of such REMIC Regular Certificates. The Prospectus Supplement for each Series of REMIC Regular Certificates will specify the Prepayment Assumption to be used for the purpose of determining the amount and rate of accrual of OID. No representation is made that the REMIC Regular Certificates will prepay at the Prepayment Assumption or at any other rate. Moreover, the OID Regulations include an anti-abuse rule allowing the IRS to apply or depart from the OID Regulations where necessary or appropriate to ensure a reasonable tax result in light of the applicable statutory provisions. A tax result will not be considered unreasonable under the anti-abuse rule in the absence of a substantial effect on the present value of a taxpayer's tax liability. Investors are advised to consult their own tax advisors as to the - 71 - discussion herein and the appropriate method for reporting interest and original issue discount with respect to the REMIC Regular Certificates. In general, each REMIC Regular Certificate will be treated as a single installment obligation issued with an amount of OID equal to the excess of its "stated redemption price at maturity" over its "issue price." The issue price of a REMIC Regular Certificate is the first price at which a substantial amount of REMIC Regular Certificates of that class are first sold to the public (excluding bond houses, brokers, underwriters or wholesalers). If less than a substantial amount of a particular class of REMIC Regular Certificates is sold for cash on or prior to the date of their initial issuance (the "CLOSING DATE"), the issue price for such class will be treated as the fair market value of such class on the Closing Date. The issue price of a REMIC Regular Certificate also includes the amount paid by an initial Certificateholder for accrued interest that relates to a period prior to the issue date of the REMIC Regular Certificate. The stated redemption price at maturity of a REMIC Regular Certificate includes the original principal amount of the REMIC Regular Certificate, but generally will not include distributions of interest if such distributions constitute "qualified stated interest." Qualified stated interest generally means interest payable at a single fixed rate or qualified variable rate (as described below) provided that such interest payments are unconditionally payable at intervals of one year or less during the entire term of the REMIC Regular Certificate. Interest is payable at a single fixed rate only if the rate appropriately takes into account the length of the interval between payments. Distributions of interest on REMIC Regular Certificates with respect to which Deferred Interest will accrue will not constitute qualified stated interest payments, and the stated redemption price at maturity of such REMIC Regular Certificates includes all distributions of interest as well as principal thereon. Where the interval between the issue date and the first Distribution Date on a REMIC Regular Certificate is longer than the interval between subsequent Distribution Dates, the greater of any OID (disregarding the rate in the first period) and any interest foregone during the first period is treated as the amount by which the stated redemption price at maturity of the Certificate exceeds its issue price for purposes of the DE MINIMIS rule described below. The OID Regulations suggest that all interest on a long first period REMIC Regular Certificate that is issued with non-DE MINIMIS OID, as determined under the foregoing rule, will be treated as OID. Where the interval between the issue date and the first Distribution Date on a REMIC Regular Certificate is shorter than the interval between subsequent Distribution Dates, interest due on the first Distribution Date in excess of the amount that accrued during the first period would be added to the Certificates, stated redemption price at maturity. REMIC Regular Certificateholders should consult their own tax advisors to determine the issue price and stated redemption price at maturity of a REMIC Regular Certificate. Under the DE MINIMIS rule, OID on a REMIC Regular Certificate will be considered to be zero if such OID is less than 0.25% of the stated redemption price at maturity of the REMIC Regular Certificate multiplied by the weighted average maturity of the REMIC Regular Certificate. For this purpose, the weighted average maturity of the REMIC Regular Certificate is computed as the sum of the amounts determined by multiplying the number of full years (i.e., rounding down partial years) from the issue date until each distribution in reduction of stated redemption price at maturity is scheduled to be made by a fraction, the numerator of which is the amount of each distribution included in the stated redemption price at maturity of the REMIC Regular Certificate and the denominator of which is the stated redemption price at maturity of the REMIC Regular Certificate. Although currently unclear, it appears that the schedule of such distributions should be determined in accordance with the Prepayment Assumption. The Prepayment Assumption with respect to a Series of REMIC Regular Certificates will be set forth in the related Prospectus Supplement. Holders generally must report DE MINIMIS OID pro rata as principal payments are received, and such income will be capital gain if the REMIC Regular Certificate is held as a capital asset. However, accrual method holders may elect to accrue all DE MINIMIS OID as well as market discount under a constant interest method. The Prospectus Supplement with respect to a Trust Fund may provide for certain REMIC Regular Certificates to be issued at prices significantly exceeding their principal amounts or based on notional principal balances (the "SUPER-PREMIUM CERTIFICATES"). The income tax treatment of such REMIC Regular Certificates is not entirely certain. For information reporting purposes, the Trust Fund intends to take the position that the stated redemption price at maturity of such REMIC Regular Certificates is the sum of all payments to be made on such REMIC Regular Certificates determined under the Prepayment Assumption, with the result that such REMIC Regular Certificates would be issued with OID. The calculation of income in this manner could result in negative OID (which delays future accruals of OID rather than being immediately deductible) when prepayments on the Mortgage Assets exceed those estimated under the Prepayment Assumption. If the Super Premium Certificates were treated as contingent payment obligations, it is unclear how holders of those Certificates would report income or recover their basis. The OID Regulations, as they relate to the treatment of contingent interest, are by their terms not applicable to Regular Certificates. However, if final regulations dealing with contingent interest with respect to Regular Certificates apply the same principles as the OID Regulations, such regulations may lead to different timing of income inclusion and different characterization of any gain on the sale of a Super-Premium Certificate than discussed above. In the alternative, the IRS could assert that the stated - 72 - redemption price at maturity of such REMIC Regular Certificates should be limited to their principal amount (subject to the discussion below under "--REMICs -- Taxation of Owners of REMIC Regular Certificates -- Accrued Interest Certificates"), so that such REMIC Regular Certificates would be considered for federal income tax purposes to be issued at a premium. If such a position were to prevail, the rules described below under "--REMICs -- Taxation of Owners of REMIC Regular Certificates -- Premium" would apply. It is unclear when a loss may be claimed for any unrecovered basis for a Super-Premium Certificate. It is possible that a holder of a Super-Premium Certificate may only claim a loss when its remaining basis exceeds the maximum amount of future payments, assuming no further prepayments or when the final payment is received with respect to such Super-Premium Certificate. Investors should consult their tax advisors regarding the appropriate treatment of Super-Premium Certificates. Under the REMIC Regulations, if the issue price of a REMIC Regular Certificate (other than a REMIC Regular Certificate based on a notional amount) does not exceed 125% of its actual principal amount, the interest rate is not considered disproportionately high. Accordingly, such REMIC Regular Certificate generally should not be treated as a Super-Premium Certificate and the rules described below under "--REMICs -- Taxation of Owners of REMIC Regular Certificates -- Premium" should apply. However, it is possible that holders of REMIC Regular Certificates issued at a premium, even if the premium is less than 25% of such Certificate's actual principal balance, will be required to amortize the premium under an OID method or contingent interest method even though no election under Code Section 171 is made to amortize such premium. Generally, a REMIC Regular Certificateholder must include in gross income the "daily portions," as determined below, of the OID that accrues on a REMIC Regular Certificate for each day a Certificateholder holds the REMIC Regular Certificate, including the purchase date but excluding the disposition date. In the case of an original holder of a REMIC Regular Certificate, a calculation will be made of the portion of the OID that accrues during each successive period ("an accrual period") that ends on the day in the calendar year corresponding to a Distribution Date (or if Distribution Dates are on the first day or first business day of the immediately preceding month, interest may be treated as payable on the last day of the immediately preceding month) and begins on the day after the end of the immediately preceding accrual period (or on the issue date in the case of the first accrual period). This will be done, in the case of each full accrual period, by (i) adding (a) the present value at the end of the accrual period (determined by using as a discount factor the original yield to maturity of the REMIC Regular Certificates as calculated under the Prepayment Assumption) of all remaining payments to be received on the REMIC Regular Certificates under the Prepayment Assumption and (b) any payments included in the stated redemption price at maturity received during such accrual period, and (ii) subtracting from that total the adjusted issue price of the REMIC Regular Certificates at the beginning of such accrual period. The adjusted issue price of a REMIC Regular Certificate at the beginning of the first accrual period is its issue price; the adjusted issue price of a REMIC Regular Certificate at the beginning of a subsequent accrual period is the adjusted issue price at the beginning of the immediately preceding accrual period plus the amount of OID allocable to that accrual period and reduced by the amount of any payment other than a payment of qualified stated interest made at the end of or during that accrual period. The OID accrued during an accrual period will then be divided by the number of days in the period to determine the daily portion of OID for each day in the accrual period. The calculation of OID under the method described above will cause the accrual of OID to either increase or decrease (but never below zero) in a given accrual period to reflect the fact that prepayments are occurring faster or slower than under the Prepayment Assumption. With respect to an initial accrual period shorter than a full accrual period, the daily portions of OID may be determined according to an appropriate allocation under any reasonable method. A subsequent purchaser of a REMIC Regular Certificate issued with OID who purchases the REMIC Regular Certificate at a cost less than the remaining stated redemption price at maturity will also be required to include in gross income the sum of the daily portions of OID on that REMIC Regular Certificate. In computing the daily portions of OID for such a purchaser (as well as an initial purchaser that purchases at a price higher than the adjusted issue price but less than the stated redemption price at maturity), however, the daily portion is reduced by the amount that would be the daily portion for such day (computed in accordance with the rules set forth above) multiplied by a fraction, the numerator of which is the amount, if any, by which the price paid by such holder for that REMIC Regular Certificate exceeds the following amount: (a) the sum of the issue price plus the aggregate amount of OID that would have been includible in the gross income of an original REMIC Regular Certificateholder (who purchased the REMIC Regular Certificate at its issue price), less (b) any prior payments included in the stated redemption price at maturity, and the denominator of which is the sum of the daily portions for that REMIC Regular Certificate for all days beginning on the date after the purchase date and ending on the maturity date computed under the Prepayment Assumption. A holder who pays an acquisition premium instead may elect to accrue OID by treating the purchase as a purchase at original issue. VARIABLE RATE REMIC REGULAR CERTIFICATES. REMIC Regular Certificates may provide for interest based on a variable rate. Interest based on a variable rate will constitute qualified stated interest and not contingent interest if, generally, (i) such interest is unconditionally payable at least annually, (ii) the issue price of the debt instrument does - 73 - not exceed the total non-contingent principal payments and (iii) interest is based on a "qualified floating rate," an "objective rate," a combination of a single fixed rate and one or more "qualified floating rates," one "qualified inverse floating rate," or a combination of "qualified floating rates" that do not operate in a manner that significantly accelerates or defers interest payments on such REMIC Regular Certificate. The amount of OID with respect to a REMIC Regular Certificate bearing a variable rate of interest will accrue in the manner described above under "--REMICs -- Taxation of Owners of REMIC Regular Certificates --Original Issue Discount and Premium" by assuming generally that the index used for the variable rate will remain fixed throughout the term of the Certificate. Appropriate adjustments are made for the actual variable rate. Although unclear at present, the Depositor intends to treat interest on a REMIC Regular Certificate that is a weighted average of the net interest rates on Mortgage Loans as qualified stated interest. In such case, the weighted average rate used to compute the initial pass-through rate on the REMIC Regular Certificates will be deemed to be the index in effect through the life of the REMIC Regular Certificates. It is possible, however, that the IRS may treat some or all of the interest on REMIC Regular Certificates with a weighted average rate as taxable under the rules relating to obligations providing for contingent payments. Such treatment may effect the timing of income accruals on such REMIC Regular Certificates. ELECTION TO TREAT ALL INTEREST AS OID. The OID Regulations permit a Certificateholder to elect to accrue all interest, discount (including DE MINIMIS market or OID) and premium in income as interest, based on a constant yield method. If such an election were to be made with respect to a REMIC Regular Certificate with market discount, the Certificateholder would be deemed to have made an election to include in income currently market discount with respect to all other debt instruments having market discount that such Certificateholder acquires during the year of the election or thereafter. Similarly, a Certificateholder that makes this election for a Certificate that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that such Certificateholder owns or acquires. See "--REMICs -- Taxation of Owners of REMIC Regular Certificates -- Premium" below. The election to accrue interest, discount and premium on a constant yield method with respect to a Certificate is irrevocable except with the approval of the IRS. MARKET DISCOUNT. A purchaser of a REMIC Regular Certificate may also be subject to the market discount provisions of Code Sections 1276 through 1278. Under these provisions and the OID Regulations, "market discount" equals the excess, if any, of (i) the REMIC Regular Certificate's stated principal amount or, in the case of a REMIC Regular Certificate with OID, the adjusted issue price (determined for this purpose as if the purchaser had purchased such REMIC Regular Certificate from an original holder) over (ii) the price for such REMIC Regular Certificate paid by the purchaser. A Certificateholder that purchases a REMIC Regular Certificate at a market discount will recognize income upon receipt of each distribution representing amounts included in such certificate's stated redemption price at maturity. In particular, under Section 1276 of the Code such a holder generally will be required to allocate each such distribution first to accrued market discount not previously included in income, and to recognize ordinary income to that extent, regardless of whether the holder is a cash-basis or an accrual basis taxpayer. A Certificateholder may elect to include market discount in income currently as it accrues rather than including it on a deferred basis in accordance with the foregoing. If made, such election will apply to all market discount bonds acquired by such Certificateholder on or after the first day of the first taxable year to which such election applies. Market discount with respect to a REMIC Regular Certificate will be considered to be zero if the amount allocable to the REMIC Regular Certificate is less than 0.25% of such REMIC Regular Certificate's stated redemption price at maturity multiplied by such REMIC Regular Certificate's weighted average maturity remaining after the date of purchase. If market discount on a REMIC Regular Certificate is considered to be zero under this rule, the actual amount of market discount must be allocated to the remaining principal payments on the REMIC Regular Certificate, and gain equal to such allocated amount will be recognized when the corresponding principal payment is made. Treasury regulations implementing the market discount rules have not yet been issued; therefore, investors should consult their own tax advisors regarding the application of these rules and the advisability of making any of the elections allowed under Code Sections 1276 through 1278. The Code provides that any principal payment (whether a scheduled payment or a prepayment) or any gain on disposition of a market discount bond acquired by the taxpayer after October 22, 1986, shall be treated as ordinary income to the extent that it does not exceed the accrued market discount at the time of such payment. The amount of accrued market discount for purposes of determining the tax treatment of subsequent principal payments or dispositions of the market discount bond is to be reduced by the amount so treated as ordinary income. - 74 - The Code also grants authority to the Treasury Department to issue regulations providing for the computation of accrued market discount on debt instruments, the principal of which is payable in more than one installment. Until such time as regulations are issued by the Treasury, rules described in the Legislative History will apply. Under those rules, the holder of a market discount bond may elect to accrue market discount either on the basis of a constant interest method rate or according to one of the following methods. For REMIC Regular Certificates issued with OID, the amount of market discount that accrues during a period is equal to the product of (i) the total remaining market discount and (ii) a fraction, the numerator of which is the OID accruing during the period and the denominator of which is the total remaining OID at the beginning of the period. For REMIC Regular Certificates issued without OID, the amount of market discount that accrues during a period is equal to the product of (a) the total remaining market discount and (b) a fraction, the numerator of which is the amount of stated interest paid during the accrual period and the denominator of which is the total amount of stated interest remaining to be paid at the beginning of the period. For purposes of calculating market discount under any of the above methods in the case of instruments (such as the REMIC Regular Certificates) that provide for payments that may be accelerated by reason of prepayments of other obligations securing such instruments, the same Prepayment Assumption applicable to calculating the accrual of OID will apply. A holder who acquired a REMIC Regular Certificate at a market discount also may be required to defer a portion of the excess of the interest paid or incurred for the taxable year attributable to any indebtedness incurred or continued to purchase or carry such Certificate purchased with market discount over the interest distributable thereon. For these purposes, the DE MINIMIS rule referred to above applies. Any such deferred excess interest expense would not exceed the market discount that accrues during such taxable year and is, in general, allowed as a deduction not later than the year in which such market discount is includible in income. The amount of any remaining deferred deduction is to be taken into account in the taxable year in which the Certificate matures or is disposed of in a taxable transaction. In the case of a disposition in which gain or loss is not recognized in whole or in part, any remaining deferred deduction will be allowed to the extent of gain recognized on the disposition. If such holder elects to include market discount in income currently as it accrues on all market discount instruments acquired by such holder in that taxable year or thereafter, the interest deferral rule described above will not apply. PREMIUM. A purchaser of a REMIC Regular Certificate that purchases the REMIC Regular Certificate at a cost (not including accrued qualified stated interest) greater than its remaining stated redemption price at maturity will be considered to have purchased the REMIC Regular Certificate at a premium and may elect to amortize such premium under a constant yield method. A Certificateholder that makes this election for a Certificate that is acquired at a premium will be deemed to have made an election to amortize bond premium with respect to all debt instruments having amortizable bond premium that such Certificateholder holds during the year of the election or thereafter. It is not clear whether the Prepayment Assumption would be taken into account in determining the life of the REMIC Regular Certificate for this purpose. However, the Legislative History states that the same rules that apply to accrual of market discount (which rules require use of a Prepayment Assumption in accruing market discount with respect to REMIC Regular Certificates without regard to whether such Certificates have OID) will also apply in amortizing bond premium under Code Section 171. The Code provides that amortizable bond premium will be allocated among the interest payments on such REMIC Regular Certificates and will be applied as an offset against such interest payment. DEFERRED INTEREST. Certain classes of REMIC Regular Certificates may provide for the accrual of Deferred Interest with respect to one or more ARM Loans. Any Deferred Interest that accrues with respect to a class of REMIC Regular Certificates will constitute income to the holders of such Certificates prior to the time distributions of cash with respect to such Deferred Interest are made. It is unclear, under the OID Regulations, whether any of the interest on such Certificates will constitute qualified stated interest or whether all or a portion of the interest payable on such Certificates must be included in the stated redemption price at maturity of the Certificates and accounted for as OID (which could accelerate such inclusion). Interest on REMIC Regular Certificates must in any event be accounted for under an accrual method by the holders of such Certificates and, therefore, applying the latter analysis may result only in a slight difference in the timing of the inclusion in income of interest on such REMIC Regular Certificates. EFFECTS OF DEFAULTS AND DELINQUENCIES. Certain Series of Certificates may contain one or more classes of Subordinated Certificates, and in the event there are defaults or delinquencies on the Mortgage Assets, amounts that would otherwise be distributed on the Subordinated Certificates may instead be distributed on the Senior Certificates. Subordinated Certificateholders nevertheless will be required to report income with respect to such Certificates under an accrual method without giving effect to delays and reductions in distributions on such Subordinated Certificates attributable to defaults and delinquencies on the Mortgage Assets, except to the extent that it can be established that such amounts are uncollectible. As a result, the amount of income reported by a Subordinated Certificateholder in any period could significantly exceed the amount of cash distributed to such holder in that period. The holder will eventually be allowed a loss (or will be allowed to report a lesser amount of income) to the extent that the aggregate amount of distributions on the Subordinated Certificate is reduced as a result of defaults and delinquencies on the Mortgage Assets. - 75 - Timing and characterization of such losses is discussed in "--REMICs -- Taxation of Owners of REMIC Regular Certificates -- Treatment of Realized Losses" below. SALE, EXCHANGE OR REDEMPTION. If a REMIC Regular Certificate is sold, exchanged, redeemed or retired, the seller will recognize gain or loss equal to the difference between the amount realized on the sale, exchange, redemption, or retirement and the seller's adjusted basis in the REMIC Regular Certificate. Such adjusted basis generally will equal the cost of the REMIC Regular Certificate to the seller, increased by any OID and market discount included in the seller's gross income with respect to the REMIC Regular Certificate, and reduced (but not below zero) by payments included in the stated redemption price at maturity previously received by the seller and by any amortized premium. Similarly, a holder who receives a payment that is part of the stated redemption price at maturity of a REMIC Regular Certificate will recognize gain equal to the excess, if any, of the amount of the payment over the holder's adjusted basis in the REMIC Regular Certificate. A REMIC Regular Certificateholder who receives a final payment that is less than the holder's adjusted basis in the REMIC Regular Certificate will generally recognize a loss. Except as provided in the following paragraph and as provided under "--REMICs -- Taxation of Owners of REMIC Regular Certificates --Market Discount" above, any such gain or loss will be capital gain or loss, provided that the REMIC Regular Certificate is held as a "capital asset" (generally, property held for investment) within the meaning of Code Section 1221. Gain from the sale or other disposition of a REMIC Regular Certificate that might otherwise be capital gain will be treated as ordinary income (i) if a REMIC Regular Certificate is held as part of a "conversion transaction" as defined in Code Section 1258(c), up to the amount of interest that would have accrued on the REMIC Regular Certificateholder's net investment in the conversion transaction at 120% of the appropriate applicable Federal rate under Code Section 1274(d) in effect at the time the taxpayer entered into the transaction minus any amount previously treated as ordinary income with respect to any prior disposition of property that was held as part of such transaction, (ii) in the case of a non-corporate taxpayer, to the extent such taxpayer has made an election under Code Section 163(d)(4) to have net capital gains taxes as investment income at ordinary income rates, or (iii) in the case of a REMIC Regular Certificate. The Certificates will be "evidences of indebtedness" within the meaning of Code Section 582(c)(1), so that gain or loss recognized from the sale of a REMIC Regular Certificate by a bank or a thrift institution to which such Section applies will be ordinary income or loss. The REMIC Regular Certificate information reports will include a statement of the adjusted issue price of the REMIC Regular Certificate at the beginning of each accrual period. In addition, the reports will include information necessary to compute the accrual of any market discount that may arise upon secondary trading of REMIC Regular Certificates. Because exact computation of the accrual of market discount on a constant yield method would require information relating to the holder's purchase price which the REMIC may not have, it appears that the information reports will only require information pertaining to the appropriate proportionate method of accruing market discount. ACCRUED INTEREST CERTIFICATES. Certain of the REMIC Regular Certificates ("PAYMENT LAG CERTIFICATES") may provide for payments of interest based on a period that corresponds to the interval between Distribution Dates but that ends prior to each such Distribution Date. The period between the Closing Date for Payment Lag Certificates and their first Distribution Date may or may not exceed such interval. Purchasers of Payment Lag Certificates for which the period between the Closing Date and the first Distribution Date does not exceed such interval could pay upon purchase of the REMIC Regular Certificates accrued interest in excess of the accrued interest that would be paid if the interest paid on the Distribution Date were interest accrued from Distribution Date to Distribution Date. If a portion of the initial purchase price of a REMIC Regular Certificate is allocable to interest that has accrued prior to the issue date ("pre-issuance accrued interest") and the REMIC Regular Certificate provides for a payment of stated interest on the first payment date (and the first payment date is within one year of the issue date) that equals or exceeds the amount of the pre-issuance accrued interest, then the REMIC Regular Certificates' issue price may be computed by subtracting from the issue price the amount of pre-issuance accrued interest, rather than as an amount payable on the REMIC Regular Certificate. However, it is unclear under this method how the OID Regulations treat interest on Payment Lag Certificates. Therefore, in the case of a Payment Lag Certificate, the Trust Fund intends to include accrued interest in the issue price and report interest payments made on the first Distribution Date as interest to the extent such payments represent interest for the number of days that the Certificateholder has held such Payment Lag Certificate during the first accrual period. Investors should consult their own tax advisors concerning the treatment for federal income tax purposes of Payment Lag Certificates. - 76 - NON-INTEREST EXPENSES OF THE REMIC. Under temporary Treasury regulations, if the REMIC is considered to be a "single-class REMIC," a portion of the REMIC's servicing, administrative and other non-interest expenses will be allocated as a separate item to those REMIC Regular Certificateholders that are "pass-through interest holders." Certificateholders that are pass-through interest holders should consult their own tax advisors about the impact of these rules on an investment in the REMIC Regular Certificates. See "--REMICs -- Taxation of Owners of REMIC Residual Certificates -- Pass-Through of Non-Interest Expenses of the REMIC" below. TREATMENT OF REALIZED LOSSES. Although not entirely clear, it appears that holders of REMIC Regular Certificates that are corporations should in general be allowed to deduct as an ordinary loss any loss sustained during the taxable year on account of any such Certificates becoming wholly or partially worthless, and that, in general, holders of Certificates that are not corporations should be allowed to deduct as a short-term capital loss any loss sustained during the taxable year on account of any such Certificates becoming wholly worthless. Although the matter is not entirely clear, non-corporate holders of Certificates may be allowed a bad debt deduction at such time that the principal balance of any such Certificate is reduced to reflect realized losses resulting from any liquidated Mortgage Assets. The Internal Revenue Service, however, could take the position that non-corporate holders will be allowed a bad debt deduction to reflect realized losses only after all Mortgage Assets remaining in the related Trust Fund have been liquidated or the Certificates of the related Series have been otherwise retired. Potential investors and holders of the Certificates are urged to consult their own tax advisors regarding the appropriate timing, amount and character of any loss sustained with respect to such Certificates, including any loss resulting from the failure to recover previously accrued interest or discount income. Special loss rules are applicable to banks and thrift institutions, including rules regarding reserves for bad debts. Such taxpayers are advised to consult their tax advisors regarding the treatment of losses on Certificates. NON-U.S. PERSONS. Generally, payments of interest (including any payment with respect to accrued OID) on the REMIC Regular Certificates to a REMIC Regular Certificateholder who is not a U.S. Person and is not engaged in a trade or business within the United States will not be subject to federal withholding tax if (i) such REMIC Regular Certificateholder does not actually or constructively own 10 percent or more of the combined voting power of all classes of equity in the Issuer; (ii) such REMIC Regular Certificateholder is not a controlled foreign corporation (within the meaning of Code Section 957) related to the Issuer; and (iii) such REMIC Regular Certificateholder complies with certain identification requirements (including delivery of a statement, signed by the REMIC Regular Certificateholder under penalties of perjury, certifying that such REMIC Regular Certificateholder is a foreign person and providing the name and address of such REMIC Regular Certificateholder). If a REMIC Regular Certificateholder is not exempt from withholding, distributions of interest to such holder, including distributions in respect of accrued OID, may be subject to a 30% withholding tax, subject to reduction under any applicable tax treaty. Further, a REMIC Regular Certificate will not be included in the estate of a non-resident alien individual and will not be subject to United States estate taxes. However, Certificateholders who are non-resident alien individuals should consult their tax advisors concerning this question. REMIC Regular Certificateholders who are not U.S. Persons and persons related to such holders should not acquire any REMIC Residual Certificates, and holders of REMIC Residual Certificates (the "REMIC RESIDUAL CERTIFICATEHOLDER") and persons related to REMIC Residual Certificateholders should not acquire any REMIC Regular Certificates without consulting their tax advisors as to the possible adverse tax consequences of doing so. Final regulations dealing with withholding tax on income paid to foreign persons and related matters (the "New Withholding Regulations") were issued by the Treasury Department on October 6, 1997. The New Withholding Regulations will generally be effective for payments made after December 31, 1998, subject to certain transition rules. Non-U.S. Persons are strongly urged to consult their own tax advisors with respect to the New Withholding Regulations. INFORMATION REPORTING AND BACKUP WITHHOLDING. The Master Servicer will furnish or make available, within a reasonable time after the end of each calendar year, to each person who was a REMIC Regular Certificateholder at any time during such year, such information as may be deemed necessary or desirable to assist REMIC Regular Certificateholders in preparing their federal income tax returns, or to enable holders to make such information available to beneficial owners or financial intermediaries that hold such REMIC Regular Certificates on behalf of beneficial owners. If a holder, beneficial owner, financial intermediary or other recipient of a payment on behalf of a beneficial owner fails to supply a certified taxpayer identification number or if the Secretary of the Treasury determines that such person has not reported all interest and dividend income required to be shown on its federal income tax return, 31% backup withholding may be required with respect to any payments. Any amounts deducted and withheld from a distribution to a recipient would be allowed as a credit against such recipient's federal income tax liability. - 77 - B. TAXATION OF OWNERS OF REMIC RESIDUAL CERTIFICATES ALLOCATION OF THE INCOME OF THE REMIC TO THE REMIC RESIDUAL CERTIFICATES. The REMIC will not be subject to federal income tax except with respect to income from prohibited transactions and certain other transactions. See "--Prohibited Transactions and Other Taxes" below. Instead, each original holder of a REMIC Residual Certificate will report on its federal income tax return, as ordinary income, its share of the taxable income of the REMIC for each day during the taxable year on which such holder owns any REMIC Residual Certificates. The taxable income of the REMIC for each day will be determined by allocating the taxable income of the REMIC for each calendar quarter ratably to each day in the quarter. Such a holder's share of the taxable income of the REMIC for each day will be based on the portion of the outstanding REMIC Residual Certificates that such holder owns on that day. The taxable income of the REMIC will be determined under an accrual method and will be taxable to the holders of REMIC Residual Certificates without regard to the timing or amounts of cash distributions by the REMIC. Ordinary income derived from REMIC Residual Certificates will be "portfolio income" for purposes of the taxation of taxpayers subject to the limitations on the deductibility of "passive losses." As residual interests, the REMIC Residual Certificates will be subject to tax rules, described below, that differ from those that would apply if the REMIC Residual Certificates were treated for federal income tax purposes as direct ownership interests in the Certificates or as debt instruments issued by the REMIC. A REMIC Residual Certificateholder may be required to include taxable income from the REMIC Residual Certificate in excess of the cash distributed. For example, a structure where principal distributions are made serially on regular interests (that is, a fast-pay, slow-pay structure) may generate such a mismatching of income and cash distributions (that is, "phantom income"). This mismatching may be caused by the use of certain required tax accounting methods by the REMIC, variations in the prepayment rate of the underlying Mortgage Assets and certain other factors. Depending upon the structure of a particular transaction, the aforementioned factors may significantly reduce the after-tax yield of a REMIC Residual Certificate to a REMIC Residual Certificateholder. Investors should consult their own tax advisors concerning the federal income tax treatment of a REMIC Residual Certificate and the impact of such tax treatment on the after-tax yield of a REMIC Residual Certificate. A subsequent REMIC Residual Certificateholder also will report on its federal income tax return amounts representing a daily share of the taxable income of the REMIC for each day that such REMIC Residual Certificateholder owns such REMIC Residual Certificate. Those daily amounts generally would equal the amounts that would have been reported for the same days by an original REMIC Residual Certificateholder, as described above. The Legislative History indicates that certain adjustments may be appropriate to reduce (or increase) the income of a subsequent holder of a REMIC Residual Certificate that purchased such REMIC Residual Certificate at a price greater than (or less than) the adjusted basis such REMIC Residual Certificate would have in the hands of an original REMIC Residual Certificateholder. See "--REMICs -- Taxation of Owners of REMIC Residual Certificates -- Sale or Exchange of REMIC Residual Certificates" below. It is not clear, however, whether such adjustments will in fact be permitted or required and, if so, how they would be made. The REMIC Regulations do not provide for any such adjustments. TAXABLE INCOME OF THE REMIC ATTRIBUTABLE TO RESIDUAL INTERESTS. The taxable income of the REMIC will reflect a netting of (i) the income from the Mortgage Assets and the REMIC's other assets and (ii) the deductions allowed to the REMIC for interest and OID on the REMIC Regular Certificates and, except as described above under "--REMICs -- Taxation of Owners of REMIC Regular Certificates -- Non-Interest Expenses of the REMIC," other expenses. REMIC taxable income is generally determined in the same manner as the taxable income of an individual using the accrual method of accounting, except that (i) the limitations on deductibility of investment interest expense and expenses for the production of income do not apply, (ii) all bad loans will be deductible as business bad debts, and (iii) the limitation on the deductibility of interest and expenses related to tax-exempt income will apply. The REMIC's gross income includes interest, OID income, and market discount income, if any, on the Mortgage Loans, reduced by amortization of any premium on the Mortgage Loans, plus income on reinvestment of cash flows and reserve assets, plus any cancellation of indebtedness income upon allocation of realized losses to the REMIC Regular Certificates. Note that the timing of cancellation of indebtedness income recognized by REMIC Residual Certificate- holders resulting from defaults and delinquencies on Mortgage Assets may differ from the time of the actual loss on the Mortgage Asset. The REMIC's deductions include interest and OID expense on the REMIC Regular Certificates, servicing fees on the Mortgage Loans, other administrative expenses of the REMIC and realized losses on the Mortgage Loans. The requirement that REMIC Residual Certificateholders report their pro rata share of taxable income or net loss of the REMIC will continue until there are no Certificates of any class of the related Series outstanding. For purposes of determining its taxable income, the REMIC will have an initial aggregate tax basis in its assets equal to the sum of the issue prices of the REMIC Regular Certificates and the REMIC Residual Certificates (or, if a class of Certificates is not sold initially, its fair market value). Such aggregate basis will be allocated among the - 78 - Mortgage Assets and other assets of the REMIC in proportion to their respective fair market value. A Mortgage Asset will be deemed to have been acquired with discount or premium to the extent that the REMIC's basis therein is less than or greater than its principal balance, respectively. Any such discount (whether market discount or OID) will be includible in the income of the REMIC as it accrues, in advance of receipt of the cash attributable to such income, under a method similar to the method described above for accruing OID on the REMIC Regular Certificates. The REMIC expects to elect under Code Section 171 to amortize any premium on the Mortgage Assets. Premium on any Mortgage Asset to which such election applies would be amortized under a constant yield method. It is not clear whether the yield of a Mortgage Asset would be calculated for this purpose based on scheduled payments or taking account of the Prepayment Assumption. Additionally, such an election would not apply to the yield with respect to any underlying mortgage loan originated on or before September 27, 1985. Instead, premium with respect to such a mortgage loan would be allocated among the principal payments thereon and would be deductible by the REMIC as those payments become due. The REMIC will be allowed a deduction for interest and OID on the REMIC Regular Certificates. The amount and method of accrual of OID will be calculated for this purpose in the same manner as described above with respect to REMIC Regular Certificates except that the 0.25% per annum DE MINIMIS rule and adjustments for subsequent holders described therein will not apply. A REMIC Residual Certificateholder will not be permitted to amortize the cost of the REMIC Residual Certificate as an offset to its share of the REMIC's taxable income. However, REMIC taxable income will not include cash received by the REMIC that represents a recovery of the REMIC's basis in its assets, and, as described above, the issue price of the REMIC Residual Certificates will be added to the issue price of the REMIC Regular Certificates in determining the REMIC's initial basis in its assets. See "--REMICs -- Taxation of Owners of REMIC Residual Certificates -- Sale or Exchange of REMIC Residual Certificates" below. For a discussion of possible adjustments to income of a subsequent holder of a REMIC Residual Certificate to reflect any difference between the actual cost of such REMIC Residual Certificate to such holder and the adjusted basis such REMIC Residual Certificate would have in the hands of an original REMIC Residual Certificateholder, see "--REMICs -- Taxation of Owners of REMIC Residual Certificates -- Allocation of the Income of the REMIC to the REMIC Residual Certificates" above. NET LOSSES OF THE REMIC. The REMIC will have a net loss for any calendar quarter in which its deductions exceed its gross income. Such net loss would be allocated among the REMIC Residual Certificateholders in the same manner as the REMIC's taxable income. The net loss allocable to any REMIC Residual Certificate will not be deductible by the holder to the extent that such net loss exceeds such holder's adjusted basis in such REMIC Residual Certificate. Any net loss that is not currently deductible by reason of this limitation may only be used by such REMIC Residual Certificateholder to offset its share of the REMIC's taxable income in future periods (but not otherwise). The ability of REMIC Residual Certificateholders that are individuals or closely held corporations to deduct net losses may be subject to additional limitations under the Code. MARK TO MARKET RULES. A REMIC Residual Certificate acquired after January 3, 1995 cannot be marked-to- market. PASS-THROUGH OF NON-INTEREST EXPENSES OF THE REMIC. As a general rule, all of the fees and expenses of a REMIC will be taken into account by holders of the REMIC Residual Certificates. In the case of a single class REMIC, however, the expenses and a matching amount of additional income will be allocated, under temporary Treasury regulations, among the REMIC Regular Certificateholders and the REMIC Residual Certificateholders on a daily basis in proportion to the relative amounts of income accruing to each Certificateholder on that day. In general terms, a single class REMIC is one that either (i) would qualify, under existing Treasury regulations, as a grantor trust if it were not a REMIC (treating all interests as ownership interests, even if they would be classified as debt for federal income tax purposes) or (ii) is similar to such a trust and is structured with the principal purpose of avoiding the single class REMIC rules. Unless otherwise stated in the applicable Prospectus Supplement, the expenses of the REMIC will be allocated to holders of the related REMIC Residual Certificates in their entirety and not to holders of the related REMIC Regular Certificates. In the case of individuals (or trusts, estates or other persons that compute their income in the same manner as individuals) who own an interest in a REMIC Regular Certificate or a REMIC Residual Certificate directly or through a pass-through interest holder that is required to pass miscellaneous itemized deductions through to its owners or beneficiaries (e.g., a partnership, an S corporation or a grantor trust), such expenses will be deductible under Code Section 67 only to the extent that such expenses, plus other "miscellaneous itemized deductions" of the individual, exceed 2% of such individual's adjusted gross income. In addition, Code Section 68 provides that the amount of itemized deductions otherwise allowable for an individual whose adjusted gross income exceeds a certain amount (the - 79 - "APPLICABLE AMOUNT") will be reduced by the lesser of (i) 3% of the excess of the individual's adjusted gross income over the Applicable Amount or (ii) 80% of the amount of itemized deductions otherwise allowable for the taxable year. The amount of additional taxable income recognized by REMIC Residual Certificateholders who are subject to the limitations of either Code Section 67 or Code Section 68 may be substantial. Further, holders (other than corporations) subject to the alternative minimum tax may not deduct miscellaneous itemized deductions in determining such holders' alternative minimum taxable income. The REMIC is required to report to each pass-through interest holder and to the IRS such holder's allocable share, if any, of the REMIC's non-interest expenses. The term "pass-through interest holder" generally refers to individuals, entities taxed as individuals and certain pass-through entities, but does not include real estate investment trusts. REMIC Residual Certificateholders that are pass-through interest holders should consult their own tax advisors about the impact of these rules on an investment in the REMIC Residual Certificates. EXCESS INCLUSIONS. A portion of the income on a REMIC Residual Certificate (referred to in the Code as an "excess inclusion") for any calendar quarter will be subject to federal income tax in all events. Thus, for example, an excess inclusion (i) may not be offset by any unrelated losses, deductions or loss carryovers of a REMIC Residual Certificateholder; (ii) will be treated as "unrelated business taxable income" within the meaning of Code Section 512 if the REMIC Residual Certificateholder is a pension fund or any other organization that is subject to tax only on its unrelated business taxable income (see "--Tax-Exempt Investors" below); and (iii) is not eligible for any reduction in the rate of withholding tax in the case of a REMIC Residual Certificateholder that is a foreign investor. See "--Non-U.S. Persons" below. Except as discussed in the following paragraph, with respect to any REMIC Residual Certificateholder, the excess inclusions for any calendar quarter is the excess, if any, of (i) the income of such REMIC Residual Certificateholder for that calendar quarter from its REMIC Residual Certificate over (ii) the sum of the "daily accruals" (as defined below) for all days during the calendar quarter on which the REMIC Residual Certificateholder holds such REMIC Residual Certificate. For this purpose, the daily accruals with respect to a REMIC Residual Certificate are determined by allocating to each day in the calendar quarter its ratable portion of the product of the "adjusted issue price" (as defined below) of the REMIC Residual Certificate at the beginning of the calendar quarter and 120 percent of the "Federal long-term rate" in effect at the time the REMIC Residual Certificate is issued. For this purpose, the "adjusted issue price" of a REMIC Residual Certificate at the beginning of any calendar quarter equals the issue price of the REMIC Residual Certificate, increased by the amount of daily accruals for all prior quarters, and decreased (but not below zero) by the aggregate amount of payments made on the REMIC Residual Certificate before the beginning of such quarter. The "federal long-term rate" is an average of current yields on Treasury securities with a remaining term of greater than nine years, computed and published monthly by the IRS. As an exception to the general rule described above, the Treasury Department has authority to issue regulations that would treat the entire amount of income accruing on a REMIC Residual Certificate as excess inclusions if the REMIC Residual Certificates in the aggregate are considered not to have "significant value." The Small Business Job Protection Act ("SBJPA") of 1996 has eliminated the special rule permitting Section 593 institutions ("THRIFT INSTITUTIONS") to use net operating losses and other allowable deductions to offset their excess inclusion income from REMIC Residual Certificates that have "significant value" within the meaning of the REMIC Regulations, effective for taxable years beginning after December 31, 1995, except with respect to REMIC Residual Certificates continuously held by thrift institutions since November 1, 1995. In addition, the SBJPA of 1996 provides three rules for determining the effect of excess inclusions on the alternative minimum taxable income of a REMIC Residual Certificateholder. First, alternative minimum taxable income for a REMIC Residual Certificateholder is determined without regard to the special rule, discussed above, that taxable income cannot be less than excess inclusions. Second, a REMIC Residual Certificateholder's alternative minimum taxable income for a taxable year cannot be less than the excess inclusions for the year. Third, the amount of any alternative minimum tax net operating loss deduction must be computed without regard to any excess inclusions. These rules are effective for taxable years beginning after December 31, 1986, unless a REMIC Residual Certificateholder elects to have such rules apply only to taxable years beginning after August 20, 1996. In the case of any REMIC Residual Certificates held by a real estate investment trust, the aggregate excess inclusions with respect to such REMIC Residual Certificates, reduced (but not below zero) by the real estate investment trust taxable income (within the meaning of Code Section 857(b)(2), excluding any net capital gain), will be allocated among the shareholders of such trust in proportion to the dividends received by such shareholders from such trust, and any amount so allocated will be treated as an excess inclusion with respect to a REMIC Residual Certificate as if held directly by such shareholder. Regulated investment companies, common trust funds and certain cooperatives are subject to similar rules. - 80 - PAYMENTS. Any distribution made on a REMIC Residual Certificate to a REMIC Residual Certificateholder will be treated as a non-taxable return of capital to the extent it does not exceed the REMIC Residual Certificateholder's adjusted basis in such REMIC Residual Certificate. To the extent a distribution exceeds such adjusted basis, it will be treated as gain from the sale of the REMIC Residual Certificate. SALE OR EXCHANGE OF REMIC RESIDUAL CERTIFICATES. If a REMIC Residual Certificate is sold or exchanged, the seller will generally recognize gain or loss equal to the difference between the amount realized on the sale or exchange and its adjusted basis in the REMIC Residual Certificate (except that the recognition of loss may be limited under the "wash sale" rules described below). A holder's adjusted basis in a REMIC Residual Certificate generally equals the cost of such REMIC Residual Certificate to such REMIC Residual Certificateholder, increased by the taxable income of the REMIC that was included in the income of such REMIC Residual Certificateholder with respect to such REMIC Residual Certificate, and decreased (but not below zero) by the net losses that have been allowed as deductions to such REMIC Residual Certificateholder with respect to such REMIC Residual Certificate and by the distributions received thereon by such REMIC Residual Certificateholder. In general, any such gain or loss will be capital gain or loss provided the REMIC Residual Certificate is held as a capital asset. However, REMIC Residual Certificates will be "evidences of indebtedness" within the meaning of Code Section 582(c)(1), so that gain or loss recognized from sale of a REMIC Residual Certificate by a bank or thrift institution to which such Section applies would be ordinary income or loss. Except as provided in Treasury regulations yet to be issued, if the seller of a REMIC Residual Certificate reacquires such REMIC Residual Certificate, or acquires any other REMIC Residual Certificate, any residual interest in another REMIC or similar interest in a "taxable mortgage pool" (as defined in Code Section 7701(i)) during the period beginning six months before, and ending six months after, the date of such sale, such sale will be subject to the "wash sale" rules of Code Section 1091. In that event, any loss realized by the REMIC Residual Certificateholder on the sale will not be deductible, but, instead, will increase such REMIC Residual Certificateholder's adjusted basis in the newly acquired asset. PROHIBITED TRANSACTIONS AND OTHER TAXES The Code imposes a tax on REMICs equal to 100% of the net income derived from "prohibited transactions" (the "PROHIBITED TRANSACTIONS TAX"). In general, subject to certain specified exceptions, a prohibited transaction means the disposition of a Mortgage Asset, the receipt of income from a source other than a Mortgage Asset or certain other permitted investments, the receipt of compensation for services, or gain from the disposition of an asset purchased with the payments on the Mortgage Assets for temporary investment pending distribution on the Certificates. It is not anticipated that the Trust Fund for any Series of Certificates will engage in any prohibited transactions in which it would recognize a material amount of net income. In addition, certain contributions to a Trust Fund as to which an election has been made to treat such Trust Fund as a REMIC made after the day on which such Trust Fund issues all of its interests could result in the imposition of a tax on the Trust Fund equal to 100% of the value of the contributed property (the "CONTRIBUTIONS TAX"). No Trust Fund for any Series of Certificates will accept contributions that would subject it to such tax. In addition, a Trust Fund as to which an election has been made to treat such Trust Fund as a REMIC may also be subject to federal income tax at the highest corporate rate on "net income from foreclosure property," determined by reference to the rules applicable to real estate investment trusts. "Net income from foreclosure property" generally means income from foreclosure property other than qualifying income for a real estate investment trust. Where any Prohibited Transactions Tax, Contributions Tax, tax on net income from foreclosure property or state or local income or franchise tax that may be imposed on a REMIC relating to any Series of Certificates arises out of or results from (i) a breach of the related Master Servicer's, Trustee's or Seller's obligations, as the case may be, under the related Agreement for such Series, such tax will be borne by such Master Servicer, Trustee or Seller, as the case may be, out of its own funds or (ii) the Seller's obligation to repurchase a Mortgage Loan, such tax will be borne by the Seller. In the event that such Master Servicer, Trustee or Seller, as the case may be, fails to pay or is not required to pay any such tax as provided above, such tax will be payable out of the Trust Fund for such Series and will result in a reduction in amounts available to be distributed to the Certificateholders of such Series. LIQUIDATION AND TERMINATION If the REMIC adopts a plan of complete liquidation, within the meaning of Code Section 860F(a)(4)(A)(i), which may be accomplished by designating in the REMIC's final tax return a date on which such adoption is deemed - 81 - to occur, and sells all of its assets (other than cash) within a 90-day period beginning on such date, the REMIC will not be subject to any Prohibited Transaction Tax, provided that the REMIC credits or distributes in liquidation all of the sale proceeds plus its cash (other than the amounts retained to meet claims) to holders of Regular and REMIC Residual Certificates within the 90-day period. The REMIC will terminate shortly following the retirement of the REMIC Regular Certificates. If a REMIC Residual Certificateholder's adjusted basis in the REMIC Residual Certificate exceeds the amount of cash distributed to such REMIC Residual Certificateholder in final liquidation of its interest, then it would appear that the REMIC Residual Certificateholder would be entitled to a loss equal to the amount of such excess. It is unclear whether such a loss, if allowed, will be a capital loss or an ordinary loss. ADMINISTRATIVE MATTERS Solely for the purpose of the administrative provisions of the Code, the REMIC generally will be treated as a partnership and the REMIC Residual Certificateholders will be treated as the partners. Certain information will be furnished quarterly to each REMIC Residual Certificateholder who held a REMIC Residual Certificate on any day in the previous calendar quarter. Each REMIC Residual Certificateholder is required to treat items on its return consistently with their treatment on the REMIC's return, unless the REMIC Residual Certificateholder either files a statement identifying the inconsistency or establishes that the inconsistency resulted from incorrect information received from the REMIC. The IRS may assert a deficiency resulting from a failure to comply with the consistency requirement without instituting an administrative proceeding at the REMIC level. The REMIC does not intend to register as a tax shelter pursuant to Code Section 6111 because it is not anticipated that the REMIC will have a net loss for any of the first five taxable years of its existence. Any person that holds a REMIC Residual Certificate as a nominee for another person may be required to furnish the REMIC, in a manner to be provided in Treasury regulations, with the name and address of such person and other information. TAX-EXEMPT INVESTORS Any REMIC Residual Certificateholder that is a pension fund or other entity that is subject to federal income taxation only on its "unrelated business taxable income" within the meaning of Code Section 512 will be subject to such tax on that portion of the distributions received on a REMIC Residual Certificate that is considered an excess inclusion. See "--REMICs -- Taxation of Owners of REMIC Residual Certificates -- Excess Inclusions" above. RESIDUAL CERTIFICATE PAYMENTS TO NON-U.S. PERSONS Amounts paid to REMIC Residual Certificateholders who are not U.S. Persons (see "--REMICs --Taxation of Owners of REMIC Regular Certificates -- Non-U.S. Persons" above) are treated as interest for purposes of the 30% (or lower treaty rate) United States withholding tax. Amounts distributed to holders of REMIC Residual Certificates should qualify as "portfolio interest," subject to the conditions described in "--REMICs -- Taxation of Owners of REMIC Regular Certificates" above, but only to the extent that the underlying mortgage loans were originated after July 18, 1984. Furthermore, the rate of withholding on any income on a REMIC Residual Certificate that is excess inclusion income will not be subject to reduction under any applicable tax treaties. See "--REMICs -- Taxation of Owners of REMIC Residual Certificates -- Excess Inclusions" above. If the portfolio interest exemption is unavailable, such amount will be subject to United States withholding tax when paid or otherwise distributed (or when the REMIC Residual Certificate is disposed of) under rules similar to those for withholding upon disposition of debt instruments that have OID. The Code, however, grants the Treasury Department authority to issue regulations requiring that those amounts be taken into account earlier than otherwise provided where necessary to prevent avoidance of tax (for example, where the REMIC Residual Certificates do not have significant value). See "--REMICs -- Taxation of Owners of REMIC Residual Certificates -- Excess Inclusions" above. If the amounts paid to REMIC Residual Certificateholders that are not U.S. persons are effectively connected with their conduct of a trade or business within the United States, the 30% (or lower treaty rate) withholding will not apply. Instead, the amounts paid to such non-U.S. Person will be subject to U.S. federal income taxation at regular graduated rates. For special restrictions on the transfer of REMIC Residual Certificates, see "--Tax-Related Restrictions on Transfers of REMIC Residual Certificates" below. REMIC Regular Certificateholders and persons related to such holders should not acquire any REMIC Residual Certificates, and REMIC Residual Certificateholders and persons related to REMIC Residual Certificateholders should not acquire any REMIC Regular Certificates, without consulting their tax advisors as to the possible adverse tax consequences of such acquisition. - 82 - TAX-RELATED RESTRICTIONS ON TRANSFERS OF REMIC RESIDUAL CERTIFICATES DISQUALIFIED ORGANIZATIONS. An entity may not qualify as a REMIC unless there are reasonable arrangements designed to ensure that residual interests in such entity are not held by "disqualified organizations" (as defined below). Further, a tax is imposed on the transfer of a residual interest in a REMIC to a "disqualified organization." The amount of the tax equals the product of (A) an amount (as determined under the REMIC Regulations) equal to the present value of the total anticipated "excess inclusions" with respect to such interest for periods after the transfer and (B) the highest marginal federal income tax rate applicable to corporations. The tax is imposed on the transferor unless the transfer is through an agent (including a broker or other middleman) for a disqualified organization, in which event the tax is imposed on the agent. The person otherwise liable for the tax shall be relieved of liability for the tax if the transferee furnished to such person an affidavit that the transferee is not a disqualified organization and, at the time of the transfer, such person does not have actual knowledge that the affidavit is false. A "disqualified organization" means (A) the United States, any State, possession or political subdivision thereof, any foreign government, any international organization or any agency or instrumentality of any of the foregoing (provided that such term does not include an instrumentality if all its activities are subject to tax and, except for FHLMC, a majority of its board of directors is not selected by any such governmental agency), (B) any organization (other than certain farmers' cooperatives) generally exempt from federal income taxes unless such organization is subject to the tax on "unrelated business taxable income" and (C) a rural electric or telephone cooperative. A tax is imposed on a "pass-through entity" (as defined below) holding a residual interest in a REMIC if at any time during the taxable year of the pass-through entity a disqualified organization is the record holder of an interest in such entity. The amount of the tax is equal to the product of (A) the amount of excess inclusions for the taxable year allocable to the interest held by the disqualified organization and (B) the highest marginal federal income tax rate applicable to corporations. The pass-through entity otherwise liable for the tax, for any period during which the disqualified organization is the record holder of an interest in such entity, will be relieved of liability for the tax if such record holder furnishes to such entity an affidavit that such record holder is not a disqualified organization and, for such period, the pass-through entity does not have actual knowledge that the affidavit is false. For this purpose, a "pass-through entity" means (i) a regulated investment company, real estate investment trust or common trust fund, (ii) a partnership, trust or estate and (iii) certain cooperatives. Except as may be provided in Treasury regulations not yet issued, any person holding an interest in a pass-through entity as a nominee for another will, with respect to such interest, be treated as a pass-through entity. In order to comply with these rules, the Agreement will provide that no record or beneficial ownership interest in a REMIC Residual Certificate may be purchased, transferred or sold, directly or indirectly, without the express written consent of the Master Servicer. The Master Servicer will grant such consent to a proposed transfer only if it receives the following: (i) an affidavit from the proposed transferee to the effect that it is not a disqualified organization and is not acquiring the REMIC Residual Certificate as a nominee or agent for a disqualified organization and (ii) a covenant by the proposed transferee to the effect that the proposed transferee agrees to be bound by and to abide by the transfer restrictions applicable to the REMIC Residual Certificate. For taxable years beginning after December 31, 1997, if an "electing large partnership" holds a REMIC Residual Certificate, all interests in the electing large partnership are treated as held by disqualified organizations for purposes of the tax imposed upon a pass-through entity by section 860(E)(e) of the Code. An exception to this tax, otherwise available to a pass-through entity that is furnished certain affidavits by record holders of interests in the entity that does not know such affidavits are false, is not available to an electing large partnership. An "electing large partnership" is a partnership that had 100 or more partners during the preceding taxable year and that has filed an election with the Internal Revenue Service to be so treated. NONECONOMIC REMIC RESIDUAL CERTIFICATES. The REMIC Regulations disregard, for federal income tax purposes, any transfer of a Noneconomic REMIC Residual Certificate to a "U.S. Person," as defined above, unless no significant purpose of the transfer is to enable the transferor to impede the assessment or collection of tax. A Noneconomic REMIC Residual Certificate is any REMIC Residual Certificate (including a REMIC Residual Certificate with a positive value at issuance) unless, at the time of transfer, taking into account the Prepayment Assumption and any required or permitted clean up calls or required liquidation provided for in the REMIC's organizational documents, (i) the present value of the expected future distributions on the REMIC Residual Certificate at least equals the product of the present value of the anticipated excess inclusions and the highest corporate income tax rate in effect for the year in which the transfer occurs and (ii) the transferor reasonably expects that the transferee will receive distributions from the REMIC at or after the time at which taxes accrue on the anticipated excess inclusions in an amount sufficient to satisfy the accrued taxes. A significant purpose to impede the assessment or collection of tax exists if the transferor, at the time of the transfer, either knew or should have known that the transferee would be unwilling or unable to pay taxes - 83 - due on its share of the taxable income of the REMIC. A transferor is presumed not to have such knowledge if (i) the transferor conducted a reasonable investigation of the transferee and (ii) the transferee acknowledges to the transferor that the residual interest may generate tax liabilities in excess of the cash flow and the transferee represents that it intends to pay such taxes associated with the residual interest as they become due. If a transfer of a Noneconomic REMIC Residual Certificate is disregarded, the transferor would continue to be treated as the owner of the REMIC Residual Certificate and would continue to be subject to tax on its allocable portion of the net income of the REMIC. The Agreement will require the transferee of a REMIC Residual Certificate to state as part of the affidavit described above under "--Tax-Related Restrictions on Transfers of REMIC Residual Certificates--Disqualified Organizations" that such transferee (i) has historically paid its debts as they come due, (ii) intends to continue to pay its debts as they come due in the future; (iii) understands that, as the holder of a noneconomic REMIC Residual Certificate, it may incur tax liabilities in excess of any cash flows generated by the REMIC Residual Certificate as they become due. The transferor must have no reason to believe that such statement is untrue. FOREIGN INVESTORS. The REMIC Regulations provide that the transfer of a REMIC Residual Certificate that has a "tax avoidance potential" to a "foreign person" will be disregarded for federal income tax purposes. This rule appears to apply to a transferee who is not a U.S. Person unless such transferee's income in respect of the REMIC Residual Certificate is effectively connected with the conduct of a United States trade or business. A REMIC Residual Certificate is deemed to have a tax avoidance potential unless, at the time of transfer, the transferor reasonably expects that the REMIC will distribute to the transferee amounts that will equal at least 30 percent of each excess inclusion, and that such amounts will be distributed at or after the time the excess inclusion accrues and not later than the end of the calendar year following the year of accrual. If the non-U.S. Person transfers the REMIC Residual Certificate to a U.S. Person, the transfer will be disregarded, and the foreign transferor will continue to be treated as the owner, if the transfer has the effect of allowing the transferor to avoid tax on accrued excess inclusions. The Agreement will provide that no record of beneficial ownership interest in a REMIC Residual Certificate may be transferred, directly or indirectly, to a non-U.S. Person unless such person provides the Trustee with a duly completed I.R.S. Form 4224 and the Trustee consents to such transfer in writing. Any attempted transfer or pledge in violation of the transfer restrictions shall be absolutely null and void and shall vest no rights in any purported transferee. Investors in REMIC Residual Certificates are advised to consult their own tax advisors with respect to transfers of the REMIC Residual Certificates and, in addition, pass-through entities are advised to consult their own tax advisors with respect to any tax which may be imposed on a pass-through entity. STATE TAX CONSIDERATIONS In addition to the federal income tax consequences described in "Federal Income Tax Consequences," potential investors should consider the state income tax consequences of the acquisition, ownership, and disposition of the Offered Certificates. State income tax law may differ substantially from the corresponding federal law, and this discussion does not purport to describe any aspect of the income tax laws of any state. Therefore, potential investors should consult their own tax advisors with respect to the various tax consequences of investments in the Offered Certificates. ERISA CONSIDERATIONS GENERAL The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), imposes certain restrictions on employee benefit plans subject to ERISA and on any entity whose underlying assets include assets of such a plan by reason of any such plan's investment in the entity ("ERISA PLANS") and on persons who are parties in interest or disqualified persons ("parties in interest") with respect to such ERISA Plans. Section 4975 of the Code imposes substantially similar prohibited transaction restrictions on tax qualified retirement plans described in Section 401(a) of the Code and on individual retirement accounts described in Section 408 of the Code ("QUALIFIED PLANS" and together with ERISA Plans, "PLANS"). Certain employee benefit plans, such as governmental plans and church plans (if no election has been made under Section 410(d) of the Code), are not subject to the restrictions of ERISA, and assets of such plans may be invested in the Certificates without regard to the ERISA considerations described below, subject to other applicable federal and state law. However, any such governmental or church plan which is qualified under Section 401(a) of the Code and exempt from taxation under Section 501(a) of the Code is subject to the prohibited transaction rules set forth in Section 503 of the Code. - 84 - Investments by ERISA Plans are subject to ERISA's general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that an ERISA Plan's investments be made in accordance with the documents governing the ERISA Plan. PROHIBITED TRANSACTIONS GENERAL Section 406 of ERISA prohibits parties in interest with respect to an ERISA Plan from engaging in certain transactions involving an ERISA Plan and its assets unless a statutory or administrative exemption applies to the transaction. Section 4975 of the Code imposes certain excise taxes (and, in some cases, a civil penalty may be assessed pursuant to Section 502(i) of ERISA) on parties in interest which engage in nonexempt prohibited transactions. The United States Department of Labor ("LABOR") has issued a final regulation (29 C.F.R. Section 2510.3-101) containing rules for determining what constitutes the assets of a Plan. This regulation provides that, as a general rule, the underlying assets and properties of corporations, partnerships, trusts and certain other entities in which a Plan makes an "equity investment" will be deemed for purposes of ERISA to be assets of the Plan unless certain exceptions apply. Under the terms of the regulation, the Trust may be deemed to hold plan assets by reason of a Plan's investment in a Certificate; such plan assets would include an undivided interest in the Mortgage Loans and any other assets held by the Trust. In such an event, the Depositor, the Servicers, the Trustee and other persons, in providing services with respect to the assets of the Trust, may be parties in interest, subject to the fiduciary responsibility provisions of Title I of ERISA, including the prohibited transaction provisions of Section 406 of ERISA (and of Section 4975 of the Code), with respect to transactions involving such assets unless such transactions are subject to a statutory or administrative exemption. The regulations contain a DE MINIMIS safe-harbor rule that exempts any entity from plan assets status as long as the aggregate equity investment in such entity by Plans is not significant. For this purpose, equity participation in the entity will be significant if immediately after any acquisition of any equity interest in the entity, "benefit plan investors" in the aggregate, own at least 25% of the value of any class of equity interest. "Benefit plan investors" are defined as Plans as well as employee benefit plans not subject to ERISA (e.g., governmental plans). The 25% limitation must be met with respect to each class of certificates, regardless of the portion of total equity value represented by such class, on an ongoing basis. AVAILABILITY OF UNDERWRITER'S EXEMPTION FOR CERTIFICATES Labor has granted an exemption (the "EXEMPTION") to the underwriter, which exempts from the application of the prohibited transaction rules transactions relating to: (1) the acquisition, sale and holding by Plans of certain certificates representing an undivided interest in certain asset-backed pass-through trusts, with respect to which the underwriter or any of its affiliates is the sole underwriter or the manager or co-manager of the underwriting syndicate; and (2) the servicing, operation and management of such asset-backed pass-through trusts, provided that the general conditions and certain other conditions set forth in the Exemption are satisfied. GENERAL CONDITIONS OF THE EXEMPTION. Section II of the Exemption sets forth the following general conditions which must be satisfied before a transaction involving the acquisition, sale and holding of the Certificates or a transaction in connection with the servicing, operation and management of the Trust Fund may be eligible for exemptive relief thereunder: (1) The acquisition of the Certificates by a Plan is on terms (including the price for such Certificates) that are at least as favorable to the investing Plan as they would be in an arm's-length transaction with an unrelated party; (2) The rights and interests evidenced by the Certificates acquired by the 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 in one of the three highest rating categories from any of Duff & Phelps Inc., Fitch Investors Service, Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings Group; - 85 - (4) The Trustee is not an affiliate of the Underwriters, the Depositor, the Servicers, any borrower whose obligations under one or more Mortgage Loans constitute more than 5% of the aggregate unamortized principal balance of the assets in the Trust, or any of their respective affiliates (the "RESTRICTED GROUP"); (5) The sum of all payments made to and retained by the Underwriters in connection with the distribution of the Certificates represents not more than reasonable compensation for underwriting such Certificates; the sum of all payments made to and retained by the Depositor pursuant to the sale 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 Servicers represent not more than reasonable compensation for the Servicers' services under the Agreements and reimbursement of the Servicer's reasonable expenses in connection therewith; and (6) The Plan investing in the Certificates is an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under the Securities Act of 1933 as amended. Before purchasing a Certificate, a fiduciary of a Plan should itself confirm (a) that the Certificates constitute "certificates" for purposes of the Exemption and (b) that the specific and general conditions set forth in the Exemption and the other requirements set forth in the Exemption would be satisfied. THE GENERAL ACCOUNT EXEMPTION Labor has issued Prohibited Transaction Class Exemption 95-60, 60 Federal Register 35925, July 12, 1995 (the "General Account Exemption), which exempts certain transactions involving insurance company general accounts from certain of the prohibited transaction provisions of ERISA and Section 4975 of the Code. Section III of the General Account Exemption applies to transactions in connection with the servicing, management and operation of a trust in which an insurance company general account has an interest as a result of its acquisition of certificates issued by the trust, provided that (i) the trust is described in an exemption such as the Exemption, (ii) the relevant conditions of the Exemption are met, other than the requirements that (a) the rights and interests evidenced by the certificates acquired by the general account are not subordinated to the rights and interests evidenced by other certificates of the same trust, and (b) the certificates acquired by the general account have received a rating at the time of acquisition that is in one of the three highest generic rating categories from one of the applicable rating agencies, and (iii) the general conditions of Section IV of the General Account Exemption are satisfied. SPECIAL CONSIDERATIONS APPLICABLE TO INSURANCE COMPANY GENERAL ACCOUNTS The SBJPA added new Section 401(c) of ERISA relating to the status of the assets of insurance company general accounts under ERISA and Section 4975 of the Code. Pursuant to Section 401(c), Labor is required to issue final regulations (the "General Account Regulations") not later than December 31, 1997 with respect to insurance policies issued on or before December 31, 1998 that are supported by an insurer's general account. The General Account Regulations are to provide guidance on which assets held by the insurer constitute "plan assets" for purposes of the fiduciary responsibility provisions of ERISA and Section 4975 of the Code. Section 401(c) also provides that, except in the case of avoidance of the General Account Regulation and actions brought by the Secretary of Labor relating to certain breaches of fiduciary duties that also constitute breaches of state or federal criminal law, until the date that is 18 months after the General Account Regulations become final, no liability under the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 may result on the basis of a claim that the assets of the general account of an insurance company constitute the plan assets of any Plan. The plan assets status of insurance company separate accounts is unaffected by new Section 401(c) of ERISA, and separate account assets continue to be treated as the plan assets of any Plan invested in a separate account. REVIEW BY PLAN FIDUCIARIES Any Plan fiduciary considering whether to purchase any Certificates on behalf of a Plan should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and the Code to such investment. Among other things, before purchasing any Certificates, a fiduciary of a Plan subject to the fiduciary responsibility provisions of ERISA or an employee benefit plan subject to the prohibited transaction provisions of the Code should make its own determination as to the availability of the exemptive relief provided in the Exemption, and also consider the availability of any other prohibited transaction exemptions. The Prospectus Supplement with respect to a Series of Certificates may contain additional information regarding the application of the Exemption, PTCE 83-1, or any other exemption, with respect to the Certificates offered thereby. - 86 - LEGAL INVESTMENT The Prospectus Supplement for each Series of Offered Certificates will identify those classes of Offered Certificates, if any, which constitute "mortgage related securities" for purposes of the Secondary Mortgage Market Enhancement Act of 1984 ("SMMEA"). Such classes will constitute "mortgage related securities" for so long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization (the "SMMEA CERTIFICATES"). As "mortgage related securities," the SMMEA Certificates will constitute legal investments for persons, trusts, corporations, partnerships, associations, business trusts and business entities (including, but not limited to, state chartered savings banks, commercial banks, savings and loan associations and insurance companies, as well as trustees and state government employee retirement systems) created pursuant to or existing under the laws of the United States or of any state (including the District of Columbia and Puerto Rico) whose authorized investments are subject to state regulation to the same extent that, under applicable law, obligations issued by or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof constitute legal investments for such entities. Alaska, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Kansas, Maryland, Michigan, Missouri, Nebraska, New Hampshire, New York, North Carolina, Ohio, South Dakota, Utah, Virginia and West Virginia enacted legislation, on or before the October 4, 1991 cutoff established by SMMEA for such enactments, limiting to varying extents the ability of certain entities (in particular, insurance companies) to invest in mortgage related securities, in most cases by requiring the affected investors to rely solely upon existing state law, and not SMMEA. In addition, pursuant to the Riegle Community Development and Regulatory Improvement Act of 1994 (the "1994 AMENDMENT"), Congress expanded the definition of securities entitled to the benefits of SMMEA to include those evidencing ownership of, or secured by, notes secured by a first lien on one or more parcels of real estate, upon which is located one or more commercial structures. The terms of this amendment permit states to prohibit or limit, by specific legislation, the authority of persons, trusts, corporations, partnerships, associations, business trusts or business entities to purchase, hold or invest, in securities evidencing ownership of, or secured by, such notes to the extent predicated on the expansion of SMMEA. The 1994 Amendment permits enactment of such restrictions until September 23, 2001. It provides, however, that no enactment will affect the validity of a contractual commitment to purchase, hold or invest in securities made before such enactment, or require sale of any securities previously acquired. The Prospectus Supplement for each Series will identify the states, if any, that have enacted any such limitations through the date of the Prospectus Supplement. Enactment of such restrictions could adversely affect the liquidity of any Offered Certificates entitled to the benefits of SMMEA solely by reason of the 1994 Amendment. Accordingly, the investors affected by such legislation will be authorized to invest in SMMEA Certificates only to the extent provided in such legislation. Accordingly, investors whose investment authority is subject to legal restrictions should consult their own legal advisors to determine whether and to what extent the Offered Certificates constitute legal investments for them. SMMEA also amended the legal investment authority of federally chartered depository institutions as follows: federal savings and loan associations and federal savings banks may invest in, sell or otherwise deal with "mortgage related securities" without limitation as to the percentage of their assets represented thereby, federal credit unions may invest in such securities, and national banks may purchase such securities for their own account without regard to the limitations generally applicable to investment securities set forth in 12 U.S.C. 24 (Seventh), subject in each case to such regulations as the applicable federal regulatory authority may prescribe. Institutions where investment activities are subject to legal investment laws or regulations or review by certain regulatory authorities may be subject to restrictions on investment in certain classes of Offered Certificates. Any financial institution which is subject to the jurisdiction of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation ("FDIC"), the Office of Thrift Supervision ("OTS"), the National Credit Union Administration ("NCUA") or other federal or state agencies with similar authority should review any applicable rules, guidelines and regulations prior to purchasing any Offered Certificate. The Federal Financial Institutions Examination Council, for example, has issued a Supervisory Policy Statement on Securities Activities effective February 10, 1992 (the "POLICY STATEMENT"). The Policy Statement has been adopted by the Comptroller of the Currency, the Federal Reserve Board, the FDIC, the OTS and the NCUA (with certain modifications), with respect to the depository institutions that they regulate. The Policy Statement prohibits depository institutions from investing in certain "high-risk mortgage securities" (including securities such as certain classes of Offered Certificates), except under limited circumstances, and sets forth certain investment practices deemed to be unsuitable for regulated institutions. The NCUA issued final regulations effective December 2, 1991 that restrict and in some instances prohibit the investment by federal credit unions in certain types of mortgage related securities. In September 1993 the National Association of Insurance Commissioners released a draft model investment law (the "MODEL LAW") which sets forth model investment guidelines for the insurance industry. Institutions subject to insurance regulatory authorities may be subject to restrictions on investment similar to those set forth in the Model Law and other restrictions. - 87 - If specified in the related Prospectus Supplement, other classes of Offered Certificates offered pursuant to this Prospectus will not constitute "mortgage related securities" under SMMEA. The appropriate characterization of these Offered Certificates under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase such Offered Certificates, may be subject to significant interpretive uncertainties. Notwithstanding SMMEA, there may be other restrictions on the ability of certain investors, including depository institutions, either to purchase any Offered Certificates or to purchase Offered Certificates representing more than a specified percentage of the investors' assets. Except as to the status of SMMEA Certificates identified in the Prospectus Supplement for a Series as "mortgage related securities" under SMMEA, the Depositor will make no representations as to the proper characterization of the Certificates for legal investment or financial institution regulatory purposes, or as to the ability of particular investors to purchase any Offered Certificates under applicable legal investment restrictions. The uncertainties described above (and any unfavorable future determinations concerning legal investment or financial institution regulatory characteristics of the Certificates) may adversely affect the liquidity of the Certificates. The foregoing does not take into consideration the applicability of statutes, rules, regulations, orders, guidelines or agreements generally governing investments made by a particular investor, including, but not limited to, "prudent investor" provisions, percentage-of-assets limits and provisions which may restrict or prohibit investment in securities which are not "interest bearing" or "income paying." There may be other restrictions on the ability of certain investors, including depository institutions, either to purchase Offered Certificates or to purchase Offered Certificates representing more than a specified percentage of the investor's assets. Investors should consult their own legal advisors in determining whether and to what extent the Offered Certificates constitute legal investments for such investors. METHOD OF DISTRIBUTION The Certificates offered hereby and by the related Prospectus Supplements will be offered in series through one or more of the methods described below. The Prospectus Supplement prepared for each series will describe the method of offering being utilized for that series and will state the net proceeds to the Depositor from such sale. The Depositor intends that Offered Certificates will be offered through the following methods from time to time and that offerings may be made concurrently through more than one of these methods or that an offering of the Offered Certificates of a particular series may be made through a combination of two or more of these methods. Such methods are as follows: 1. By negotiated firm commitment or best efforts underwriting and public re-offering by underwriters; 2. By placements by the Depositor with institutional investors through dealers; and 3. By direct placements by the Depositor with institutional investors. In addition, if specified in the related Prospectus Supplement, the Offered Certificates of a series may be offered in whole or in part to the seller of the related Mortgage Assets that would comprise the Trust Fund for such Certificates. If underwriters are used in a sale of any Offered Certificates (other than in connection with an underwriting on a best efforts basis), such Certificates will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at fixed public offering prices or at varying prices to be determined at the time of sale or at the time of commitment therefor. Such underwriters may be broker-dealers affiliated with the Depositor whose identities and relationships to the Depositor will be as set forth in the related Prospectus Supplement. The managing underwriter or underwriters with respect to the offer and sale of Offered Certificates of a particular series will be set forth on the cover of the Prospectus Supplement relating to such series and the members of the underwriting syndicate, if any, will be named in such Prospectus Supplement. In connection with the sale of Offered Certificates, underwriters may receive compensation from the Depositor or from purchasers of the Offered Certificates in the form of discounts, concessions or commissions. Underwriters and dealers participating in the distribution of the Offered Certificates may be deemed to be underwriters in connection with - 88 - such Certificates, and any discounts or commissions received by them from the Depositor and any profit on the resale of Offered Certificates by them may be deemed to be underwriting discounts and commissions under the Securities Act. It is anticipated that the underwriting agreement pertaining to the sale of the Offered Certificates of any series will provide that the obligations of the underwriters will be subject to certain conditions precedent, that the underwriters will be obligated to purchase all such Certificates if any are purchased (other than in connection with an underwriting on a best efforts basis) and that, in limited circumstances, the Depositor will indemnify the several underwriters and the underwriters will indemnify the Depositor against certain civil liabilities, including liabilities under the Securities Act or will contribute to payments required to be made in respect thereof. The Prospectus Supplement with respect to any series offered by placements through dealers will contain information regarding the nature of such offering and any agreements to be entered into between the Depositor and purchasers of Offered Certificates of such series. The Depositor anticipates that the Certificates offered hereby will be sold primarily to institutional investors. Purchasers of Offered Certificates, including dealers, may, depending on the facts and circumstances of such purchases, be deemed to be "underwriters" within the meaning of the Securities Act in connection with reoffers and sales by them of Offered Certificates. Holders of Offered Certificates should consult with their legal advisors in this regard prior to any such reoffer or sale. LEGAL MATTERS Certain legal matters in connection with the Certificates, including certain federal income tax consequences, will be passed upon for the Depositor by Andrews & Kurth L.L.P., Dallas, Texas. 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 he included in this Prospectus or in the related Prospectus Supplement. RATING It is a condition to the issuance of any class of Offered Certificates that they shall have been rated not lower than investment grade, that is, in one of the four highest rating categories, by a Rating Agency. Ratings on mortgage pass-through certificates address the likelihood of receipt by certificateholders of all distributions on the underlying mortgage loans. These ratings address the structural, legal and issuer-related aspects associated with such certificates, the nature of the underlying mortgage loans and the credit quality of the guarantor, if any. Ratings on mortgage pass-through certificates do not represent any assessment of the likelihood of principal prepayments by Mortgagors or of the degree by which such prepayments might differ from those originally anticipated. As a result, certificateholders might suffer a lower than anticipated yield, and, in addition, holders of stripped interest certificates in extreme cases might fail to recoup their initial investments. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organization. Each security rating should be evaluated independently of any other security rating. - 89 - INDEX OF PRINCIPAL DEFINITIONS Page ---- "1986 Act" ..........................................................68 "1994 Amendment" ..........................................................87 "Accounts" ..........................................................38 "Accrual Certificates"..................................................10, 10 "Accrued Certificate Interest"..............................................30 "ADA" ..........................................................63 "Agreements" ..........................................................10 "Applicable Amount".........................................................80 "ARM Loans" ......................................................23, 68 "Asset Seller" ..........................................................20 "Available Distribution Amount".............................................29 "Balloon Mortgage Loans"....................................................16 "Bankruptcy Code" ..........................................................56 "Beneficial Owners".........................................................34 "Book-Entry Certificates"...................................................29 "Cash Flow Agreements".......................................................1 "Cash Flow Agreement"...................................................10, 25 "Cede" .......................................................3, 34 "CERCLA" ......................................................18, 59 "Certificate Balance"...................................................10, 30 "Certificateholders"........................................................19 "Certificates" ....................................................1, 8, 86 "Certificate" ..........................................................35 "Closing Date" ..........................................................72 "CMBS Agreement" ..........................................................23 "CMBS Issuer" ..........................................................23 "CMBS Servicer" ..........................................................23 "CMBS Trustee" ..........................................................24 "CMBS" ....................................................1, 8, 20 "Code" ..........................................................12 "Commercial Loans"..........................................................20 "Commercial Properties"..................................................8, 20 "Commission" ...........................................................3 "Contributions Tax".........................................................82 "Cooperative Loans".........................................................52 "Cooperatives" ..........................................................20 "Cooperative" ..........................................................52 "Covered Trust" ......................................................17, 48 "CPR" ..........................................................27 "Credit Support" ....................................................1, 9, 24 "Crime Control Act".........................................................64 "Cut-off Date" ..........................................................11 "Debt Service Coverage Ratio"...............................................21 "Deferred Interest".........................................................69 "Definitive Certificates"...............................................29, 35 "Depositor" .......................................................8, 20 "Determination Date"........................................................29 "Disqualifying Condition"...................................................61 "Distribution Account"......................................................40 "Distribution Date".........................................................11 "DTC" .......................................................3, 34 "Environmental Hazard Condition"............................................61 "EPA" ..........................................................59 "Equity Participations".....................................................23 "ERISA Plans" ..........................................................85 "ERISA" ......................................................13, 85 "excess servicing"..........................................................67 "Exchange Act" ...........................................................3 "Exemption" ..........................................................86 "FDIC" ......................................................38, 87 "Grantor Trust Certificates"................................................12 "Hazardous Materials".......................................................61 "Indirect Participants".....................................................34 "Insurance Proceeds"........................................................39 "IRS" ..........................................................66 "L/C Bank" ..........................................................49 "Labor" ..........................................................85 "Lease Assignment"...........................................................1 "Lease" ........................................................3, 8 "Legislative History".......................................................69 "Lessee" ........................................................3, 8 "Liquidation Proceeds"......................................................39 "Loan-to-Value Ratio".......................................................22 "Lock-out Date" ..........................................................23 "Lock-out Period" ..........................................................23 "Master REMIC" ..........................................................71 "Master Servicer" ...........................................................8 "Model Law" ..........................................................88 "Mortgage Assets" .......................................................1, 20 "Mortgage Interest Rate".................................................9, 23 "Mortgage Loans" ........................................................1, 8 "Mortgage Notes" ..........................................................20 "Mortgaged Properties".......................................................8 "Mortgages" ..........................................................20 "Mortgagor" ..........................................................51 "Multifamily Loans".........................................................20 "Multifamily Properties".................................................8, 20 "NCUA" ..........................................................87 "Net Operating Income"......................................................21 "Nonrecoverable Advance"....................................................31 "Offered Certificates"....................................................1, 1 "OID Regulations" ..........................................................66 "OID" ..........................................................64 "Originator" ..........................................................20 "OTS" ..........................................................87 "Participants" ..........................................................34 "parties in interest".......................................................85 "Pass-Through Rate".........................................................30 "Payment Lag Certificates"..................................................77 "Permitted Investments".....................................................38 "Plans" ..........................................................85 "Policy Statement"..........................................................87 "Prepayment Assumption".....................................................69 "Prepayment Premium"........................................................23 "Primary Servicer"...........................................................8 "Prohibited Transactions Tax"...............................................82 "Prospectus Supplement"......................................................1 "Purchase Price" ..........................................................37 "Qualified Plans" ..........................................................85 "Rating Agency" ..........................................................13 "RCRA" ..........................................................60 "Record Date" ..........................................................29 "Refinance Loans" ..........................................................22 "REIT" ..........................................................72 "Related Proceeds"..........................................................31 "Relief Act" ..........................................................63 "REMIC Certificates"........................................................71 "REMIC Regular Certificateholder"...........................................72 "REMIC Regular Certificates"................................................12 "REMIC Regulations".........................................................64 - 90 - INDEX OF PRINCIPAL DEFINITIONS (CONTINUED) Page ---- "REMIC Residual Certificateholder"..........................................78 "REMIC Residual Certificates"...............................................12 "REMIC" .......................................................2, 12 "Restricted Group"..........................................................86 "Retained Interest".........................................................44 "RICO" ..........................................................64 "SBJPA" ..........................................................81 "Securities Act" ...........................................................3 "Senior Certificates"...................................................10, 28 "Series" ...........................................................1 "Servicer" ..........................................................11 "Servicing Standard"........................................................40 "Servicing Transfer Event"..................................................41 "SMMEA Certificates"........................................................87 "SMMEA" ..........................................................87 "Special Servicer"...........................................................8 "Specially Serviced Mortgage Loan"..........................................41 "Startup Day" ..........................................................71 "Stripped ARM Obligations"..................................................69 "Stripped Bond Certificates"................................................67 "Stripped Coupon Certificates"..............................................67 "Stripped Interest Certificates"........................................10, 28 "Stripped Principal Certificates".......................................10, 28 "Subordinate Certificates"..............................................10, 28 "Subsidiary REMIC"..........................................................71 "Super-Premium Certificates"................................................73 "thrift institutions".......................................................81 "Title V" ..........................................................62 "TMP" ..........................................................71 "Trust Assets" ...........................................................2 "Trust Fund" ...........................................................1 "Trustee" ...........................................................8 "U.S. Person" ..........................................................70 "UCC" ..........................................................34 "Underlying CMBS" ..........................................................20 "Underlying Mortgage Loans".................................................20 "Value" ..........................................................22 "Voting Rights" ..........................................................19 "Warranting Party"......................................................14, 37 "Whole Loans" ..........................................................20 - 91 - ================================================================================ NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE DEPOSITOR OR BY THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SINCE THE DATE OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ------------------- TABLE OF CONTENTS PROSPECTUS SUPPLEMENT Page ---- Summary of Prospectus Supplement............................................. Risk Factors................................................................. Description of the Mortgage Pool............................................. Description of the Certificates.............................................. Certain Prepayment, Maturity and Yield Considerations....................................................... Servicing.................................................................... Description of the Pooling and Servicing Agreement........................................................ Use of Proceeds.............................................................. Federal Income Tax Consequences............................................. State Tax Considerations..................................................... ERISA Considerations......................................................... Legal Investment............................................................. Method of Distribution....................................................... Legal Matters................................................................ Rating....................................................................... Index of Principal Definitions............................................... Annex A: Certain Characteristics of the Mortgage Loans......................................................... Annex B: Form of Monthly Report............................................. PROSPECTUS Prospectus Supplement........................................................ Available Information........................................................ Incorporation of Certain Information by Reference............................................................... Summary of Prospectus........................................................ Risk Factors................................................................. Description of the Trust Funds............................................... Use of Proceeds.............................................................. Yield Considerations......................................................... The Depositor ............................................................... Description of the Certificates.............................................. Description of the Agreements................................................ Description of Credit Support................................................ Certain Legal Aspects of Mortgage Loans and the Leases....................................................... Federal Income Tax Consequences.............................................. State Tax Considerations..................................................... ERISA Considerations......................................................... Legal Investment............................................................. Method of Distribution....................................................... Legal Matters................................................................ Financial Information........................................................ Rating....................................................................... Index of Principal Definitions............................................... ================================================================================ ================================================================================ $------------ (APPROXIMATE) ICIFC SECURED ASSETS CORP. CLASS A1, CLASS A1X, CLASS A2, CLASS A2X, CLASS B, CLASS C, CLASS BCX, CLASS D AND CLASS E MORTGAGE PASS-THROUGH CERTIFICATES SERIES 199___-___ --------------- PROSPECTUS SUPPLEMENT --------------- _____________, 199__ ================================================================================ PART II INFORMATION NOT REQUIRED TO BE IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Estimated expenses in connection with the issuance and distribution of the securities, other than underwriting discounts and commissions*, are as follows: Registration Fee -- Securities and Exchange Commission.............. $ 295.00 Printing and Engraving Expenses.......................................... ** Accounting Fees and Expenses........................................... ** Legal Fees and Expenses................................................ ** Trustee Fees and Expenses.............................................. ** Rating Agency Fees..................................................... ** Miscellaneous Expenses................................................. ** Total...................................................... $ 295.00 ====== - --------- * To be provided for each Series of Securities on the cover page of the related Prospectus Supplement. ** To be provided by Amendment. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Under the proposed form of Underwriting Agreement to be filed as Exhibit 1.1 hereto, the Underwriter will be obligated under certain circumstances to indemnify officers and directors of ICIFC Secured Assets Corp. (the "COMPANY") who sign the Registration Statement, and certain controlling persons of the Company, against certain liabilities, including liabilities under the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended. The Company's Certificate of Incorporation provides for indemnification of directors and officers of the Company to the full extent permitted by California law. Section 317 of the California General Corporation Law provides, in substance, that California corporations shall have the power, under specified circumstances, to indemnify their directors, officers, employees and agents in connection with threatened, pending or completed actions or proceedings brought against them (other than an action by or in the right of the Company to procure a judgment in its favor) by reason of the fact that such persons are or were directors, officers, employees or agents, against (i) expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any such action, suit or proceeding and (ii) with respect to actions by or in the right of the Company to procure a judgment in its favor, against expenses actually and reasonably incurred in connection with any such action, suit or proceeding. The California General Corporation Law also provides that the Company may purchase insurance on behalf of any such director, officer, employee or agent. The Company has entered into agreements with its directors and executive officers that would require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors to the fullest extent not prohibited by law. The Company does not maintain liability insurance for its officers or directors. The Pooling and Servicing Agreement will provide that no director, officer, employee or agent of the Company will be liable to the Trust Fund, the Certificateholders or the Noteholders for any action taken or for refraining from the taking of any action pursuant to the Pooling and Servicing Agreement, the Servicing Agreement, Indenture or Owner Trust Agreement, as applicable, except for such person's own misfeasance, bad faith or gross negligence in the performance of duties. The Pooling and Servicing Agreement with respect to each series of Certificates, and the Servicing Agreements, Indentures, and Owner Trust Agreements with respect to each series of Notes, will provide further that, with the exceptions stated above, any director, officer, employee or agent of the Company will be II-1 indemnified and held harmless against any loss, liability or expense incurred in connection with any legal action relating to such Pooling and Servicing Agreement, Servicing Agreements, Indentures and Owner Trust Agreements, the related Certificates and Notes, other than any loss, liability or expense (i) related to any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense shall be otherwise reimbursable pursuant to such agreements), (ii) incurred in connection with any violation by him or her of any state or federal securities law or (iii) imposed by any taxing authority if such loss, liability or expense is not specifically reimbursable pursuant to the terms of such agreements. ITEM 16. EXHIBITS Exhibit Number ------ *1.1 Form of Underwriting Agreement *3.1 Amended Articles of Incorporation of the Company *3.2 Bylaws of the Company *4.1 Form of Pooling and Servicing Agreement for an offering of Pass-Through Certificates consisting of senior and subordinated classes related to the Residential Loan Prospectus *4.2 Form of Pooling and Servicing Agreement for alternate forms of credit support (single class) related to the Residential Loan Prospectus **4.3 Form of Servicing Agreement for an offering of Mortgage-Backed Notes related to the Residential Loan Prospectus **4.4 Form of Trust Agreement for an offering of Mortgage-Backed Notes related to the Residential Loan Prospectus **4.5 Form of Indenture for an offering of Mortgage-Backed Notes related to the Residential Loan Prospectus ***4.6 Form of Pooling and Servicing Agreement related to the Commercial Loan Prospectus ***4.7 Form of Loan Sale Agreement related to the Commercial Loan Prospectus ***5.1 Opinion of Thacher Proffitt & Wood regarding the legality of the Certificates and the Notes issued pursuant to the Residential Loan Prospectus ***5.2 Opinion of Andrews & Kurth L.L.P. regarding the legality of the Certificates issued pursuant to the Commercial Loan Prospectus ***8.1 Opinion of Thacher Proffitt & Wood regarding certain tax matters related to the Certificates and the Notes issued pursuant to Residential Loan Prospectus (included with Exhibit 5.1) ***8.2 Opinion of Andrews & Kurth L.L.P. regarding tax matters related to the Certificates issued pursuant to the Commercial Loan Prospectus ***23.1 Consent of Thacher Proffitt & Wood (included as part of Exhibit 5.1) ***23.2 Consent of Andrews & Kurth L.L.P. (included as part of Exhibits 5.2 and 8.2) 24.1 Power of Attorney (included on the signature page hereto) **99.1 Form of Prospectus Supplement for use in an offering of Certificates, under the Residential Loan Prospectus, consisting of senior and subordinate certificate classes II-2 **99.2 Form of Prospectus Supplement for use in an offering of Certificates, under the Residential Loan Prospectus, which provides for credit support in the form of a letter of credit **99.3 Form of Prospectus Supplement for use in an offering of Notes under the Residential Loan Prospectus - ---------- * Incorporated by reference from the Registration Statement on Form S-3 (File No. 333-8439) ** Incorporated by reference from the Registration Statement on Form S-3 (File No. 333-40125) *** Filed herewith. ITEM 17. UNDERTAKINGS (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "Securities Act"); (ii) to reflect in the Prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; provided, however, that no such post-effective amendment shall be required if the information which would be required by clauses (i) and (ii) is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 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 Irvine, State of California on the 8th day of January, 1998. ICIFC SECURED ASSETS CORP. By: /s/ William Ashmore ---------------------------------------- William Ashmore, Chief Executive Officer Each person whose signature appears below does hereby make, constitute and appoint William Ashmore and Richard Johnson and each of them his or her true and lawful attorney with full power of substitution to execute, deliver and file with the Securities and Exchange Commission, for and on his or her behalf, and in his or her capacity or capacities as stated below, any amendment (including post-effective amendments) to the Registration Statement with all exhibits thereto, making such changes in the Registration Statement as the Registrant deems appropriate. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ William Ashmore Director, Chairman of the Board, January 8, 1998 - --------------------------------------------- Chief Executive Officer, (Principal William Ashmore Executive Officer) /s/ Richard Johnson Director, Chief Financial Officer January 8, 1998 - --------------------------------------------- (Principal Financial Officer and Richard Johnson Principal Accounting Officer) and Secretary /s/ Blaine Ung Director January 8, 1998 - --------------------------------------------- Blaine Ung
II-4 INDEX TO EXHIBITS Exhibit Number ------ *1.1 Form of Underwriting Agreement *3.1 Amended Articles of Incorporation of the Company *3.2 Bylaws of the Company *4.1 Form of Pooling and Servicing Agreement for an offering of Pass-Through Certificates consisting of senior and subordinated classes related to the Residential Loan Prospectus *4.2 Form of Pooling and Servicing Agreement for alternate forms of credit support (single class) related to the Residential Loan Prospectus **4.3 Form of Servicing Agreement for an offering of Mortgage-Backed Notes related to the Residential Loan Prospectus **4.4 Form of Trust Agreement for an offering of Mortgage-Backed Notes related to the Residential Loan Prospectus **4.5 Form of Indenture for an offering of Mortgage-Backed Notes related to the Residential Loan Prospectus ***4.6 Form of Pooling and Servicing Agreement related to the Commercial Loan Prospectus ***4.7 Form of Loan Sale Agreement related to the Commercial Loan Prospectus ***5.1 Opinion of Thacher Proffitt & Wood regarding the legality of the Certificates and the Notes issued pursuant to the Residential Loan Prospectus ***5.2 Opinion of Andrews & Kurth L.L.P. regarding the legality of the Certificates issued pursuant to the Commercial Loan Prospectus ***8.1 Opinion of Thacher Proffitt & Wood regarding certain tax matters related to the Certificates and the Notes issued pursuant to Residential Loan Prospectus (included with Exhibit 5.1) ***8.2 Opinion of Andrews & Kurth L.L.P. regarding tax matters related to the Certificates issued pursuant to the Commercial Loan Prospectus ***23.1 Consent of Thacher Proffitt & Wood (included as part of Exhibit 5.1) ***23.2 Consent of Andrews & Kurth L.L.P. (included as part of Exhibits 5.2 and 8.2) 24.1 Power of Attorney (included on the signature page hereto) **99.1 Form of Prospectus Supplement for use in an offering of Certificates, under the Residential Loan Prospectus, consisting of senior and subordinate certificate classes **99.2 Form of Prospectus Supplement for use in an offering of Certificates, under the Residential Loan Prospectus, which provides for credit support in the form of a letter of credit **99.3 Form of Prospectus Supplement for use in an offering of Notes under the Residential Loan Prospectus ---------- * Incorporated by reference from the Registration Statement on Form S-3 (File No. 333-8439) ** Incorporated by reference from the Registration Statement on Form S-3 (File No. 333-40125) *** Filed herewith. EX-4.6 2 FORM OF POOLING AND SERVICING AGREEMENT EXHIBIT 4.6 ================================================================================ ICIFC SECURED ASSETS CORP. Depositor --------------------------------- Master Servicer -------------------------------- Special Servicer -------------------------------- Trustee and -------------------------------- Fiscal Agent -------------------------------------------------------- POOLING AND SERVICING AGREEMENT Dated as of ___________________ ------------------------------------------------------ MORTGAGE PASS-THROUGH CERTIFICATES Series 199__-__ ================================================================================
TABLE OF CONTENTS PAGE ---- ARTICLE I - DEFINITIONS.......................................................................4 SECTION 1.01 Defined Terms........................................................4 SECTION 1.02 Certain Calculations................................................43 SECTION 1.03 Certain Constructions...............................................44 ARTICLE II - CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES............................................44 SECTION 2.01 Conveyance of Mortgage Loans........................................44 SECTION 2.02 Acceptance by Trustee...............................................48 SECTION 2.03 Representations, Warranties and Covenants of the Depositor; Sellers' Repurchase of Mortgage Loans for Defects in Mortgage Loan Files and Breaches of Representations and Warranties................................49 SECTION 2.04 Representations, Warranties and Covenants of the Master Servicer and Special Servicer.................................52 SECTION 2.05 Execution and Delivery of Certificates; Issuance of REMIC I Regular Interests and REMIC II Regular Interests..............55 SECTION 2.06 Miscellaneous REMIC Provisions......................................56 ARTICLE III - ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS.............................56 SECTION 3.01 Master Servicer to Act as Servicer; Administration of the Mortgage Loans............................................56 SECTION 3.02 Liability of the Master Servicer....................................59 SECTION 3.03 Collection of Certain Mortgage Loan Payments........................59 SECTION 3.04 Collection of Taxes, Assessments and Similar Items; Escrow Accounts...............................................60 SECTION 3.05 Collection Account and Certificate Account..........................61 SECTION 3.06 Permitted Withdrawals from the Collection Account...................62 SECTION 3.07 Investment of Funds in the Collection Account, the Certificate Account, the REO Account, the Lock-Box Accounts, the Cash Collateral Accounts and the Reserve Accounts.........65 SECTION 3.08 Maintenance of Insurance Policies and Errors and Omissions and Fidelity Coverage.........................................66 SECTION 3.09 Enforcement of Due-On-Sale Clauses; Assumption Agreements...........70 SECTION 3.10 Appraisals; Realization Upon Defaulted Mortgage Loans...............71 SECTION 3.11 Trustee to Cooperate; Release of Mortgage Loan Files................75 SECTION 3.12 Master Servicing Fees, Trustee Fees and Special Servicing Compensation........................................76 SECTION 3.13 Reports to the Trustee; Collection Account Statements...............78 SECTION 3.14 Annual Statement as to Compliance...................................79 SECTION 3.15 Annual Independent Public Accountants' Servicing Report.............79 SECTION 3.16 Access to Certain Documentation.....................................80 SECTION 3.17 Title and Management of REO Properties and REO Account Properties........................................80 SECTION 3.18 Sale of Specially Serviced Mortgage Loans and REO Properties........84
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TABLE OF CONTENTS (Continued) PAGE ---- SECTION 3.19 Additional Obligations of the Master Servicer and Special Servicer; Inspections.................................86 SECTION 3.20 Authenticating Agent................................................86 SECTION 3.21 Appointment of Custodians...........................................87 SECTION 3.22 Reports to the Securities and Exchange Commission; Available Information.........................................87 SECTION 3.23 Lock-Box Accounts, Cash Collateral Accounts, Escrow Accounts and Reserve Accounts..........................92 SECTION 3.24 Property Advances...................................................92 SECTION 3.25 Appointment of Special Servicer.....................................93 SECTION 3.26 Transfer of Servicing Between Servicer and Special Servicer; Record Keeping................................................93 SECTION 3.27 Master Servicer to Pay Fees of Rating Agencies......................94 SECTION 3.28 Limitations on and Authorizations of the Master Servicer and Special Servicer with Respect to Certain Mortgage Loans.......95 SECTION 3.29 Modification, Waiver, Amendment and Consents........................96 ARTICLE IV - DISTRIBUTIONS TO CERTIFICATEHOLDERS............................................101 SECTION 4.01 Distributions......................................................101 SECTION 4.02 Statements to Certificateholders; Available Information; Information Furnished to Financial Market Publisher..........104 SECTION 4.03 Compliance with Withholding Requirements...........................105 SECTION 4.04 REMIC Compliance...................................................106 SECTION 4.05 Imposition of Tax on the Trust Fund................................108 SECTION 4.06 Remittances; P&I Advances..........................................109 SECTION 4.07 Allocations of Realized Losses and Collateral Value Adjustments..................................................111 SECTION 4.08 REMIC I............................................................112 SECTION 4.09 REMIC II...........................................................112 SECTION 4.10 Prepayment Premiums................................................114 ARTICLE V - THE CERTIFICATES................................................................114 SECTION 5.01 The Certificates...................................................114 SECTION 5.02 Registration of Transfer and Exchange of Certificates..............116 SECTION 5.03 Mutilated, Destroyed, Lost or Stolen Certificates..................119 SECTION 5.04 Persons Deemed Owners..............................................119 ARTICLE VI - THE DEPOSITOR, THE MASTER SERVICER AND THE SPECIAL SERVICER...............................................119 SECTION 6.01 Liability of the Depositor, the Master Servicer and the Special Servicer.........................................119 SECTION 6.02 Merger or Consolidation of the Master Servicer.....................119 SECTION 6.03 Limitation on Liability of the Depositor, the Master Servicer and Others..........................................120
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TABLE OF CONTENTS (Continued) PAGE ---- SECTION 6.04 Limitation on Resignation of the Master Servicer and the Special Servicer; Termination of the Master Servicer and the Special Servicer............................121 SECTION 6.05 Rights of the Depositor and the Trustee in Respect of the Master Servicer and the Special Servicer.....................122 SECTION 6.06 Master Servicer or Special Servicer as Owner of a Certificate......122 ARTICLE VII - DEFAULT.......................................................................123 SECTION 7.01 Events of Default..................................................123 SECTION 7.02 Trustee to Act; Appointment of Successor...........................127 SECTION 7.03 Notification to Certificateholders.................................128 SECTION 7.04 Other Remedies of Trustee..........................................128 SECTION 7.05 Waiver of Past Events of Default; Termination......................129 ARTICLE VIII - CONCERNING THE TRUSTEE.......................................................129 SECTION 8.01 Duties of Trustee..................................................129 SECTION 8.02 Certain Matters Affecting the Trustee..............................131 SECTION 8.03 Trustee and Fiscal Agent Not Liable for Certificates or Mortgage Loans...............................................133 SECTION 8.04 Trustee and Fiscal Agent May Own Certificates......................134 SECTION 8.05 Payment of Trustee's Fees and Expenses; Indemnification............134 SECTION 8.06 Eligibility Requirements for Trustee...............................136 SECTION 8.07 Resignation and Removal of the Trustee and the Fiscal Agent........136 SECTION 8.08 Successor Trustee and Fiscal Agent.................................137 SECTION 8.09 Merger or Consolidation of Trustee.................................138 SECTION 8.10 Appointment of Co-Trustee or Separate Trustee......................138 SECTION 8.11 Fiscal Agent Appointed; Concerning the Fiscal Agent................140 SECTION 8.12 Monitoring Certificateholders and Controlling Class Representative.........................................140 SECTION 8.13 Representations and Warranties of the Trustee and the Fiscal Agent.............................................141 ARTICLE IX - TERMINATION....................................................................143 SECTION 9.01 Termination........................................................143 ARTICLE X - MISCELLANEOUS PROVISIONS........................................................145 SECTION 10.01 Counterparts.......................................................145 SECTION 10.02 Limitation on Rights of Certificateholders.........................145 SECTION 10.03 Governing Law......................................................146 SECTION 10.04 Notices............................................................146 SECTION 10.05 Severability of Provisions.........................................148 SECTION 10.06 Notice to the Depositor and Each Rating Agency.....................148 SECTION 10.07 Amendment..........................................................149 SECTION 10.08 Confirmation of Intent.............................................151
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TABLE OF CONTENTS (Continued) PAGE ---- SECTION 10.09 No Intended Third-Party Beneficiaries..............................152
- iv - TABLE OF EXHIBITS Schedule A Servicing Fee Rate Exhibit A-1 Form of Class A1 Certificate Exhibit A-2 Form of Class A2 Certificate Exhibit A-3 Form of Class A3 Certificate Exhibit A-4 Form of Class B Certificate Exhibit A-5 Form of Class C Certificate Exhibit A-6 Form of Class D Certificate Exhibit A-7 Form of Class E Certificate Exhibit A-8 Form of Class F Certificate Exhibit A-9 Form of Class X Certificate Exhibit A-10 Form of Class G Certificate Exhibit A-11 Form of Class H Certificate Exhibit A-12 Form of Class J Certificate Exhibit A-13 Form of Class K Certificate Exhibit A-14 Form of Class L Certificate Exhibit A-15 Form of Class R-I Certificate Exhibit A-16 Form of Class R-II Certificate Exhibit A-17 Form of Class R-III Certificate Exhibit B Mortgage Loan Schedule Exhibit C Form of Transferor Certificate Exhibit D Form of Investment Letter - Qualified Institutional Buyer Exhibit E Form of Investment Letter - Institutional Accredited Investor Exhibit F-1 Form of Transfer Affidavit Exhibit F-2 Form of Transferor Certificate Exhibit G Form of Request for Release Exhibit H Securities Legend Exhibit I Mortgage Loan Purchase Agreements Exhibit J Form of Summary Report Exhibit K Form of Acknowledgment Exhibit L [Reserved] Exhibit M Form of Statement to Certificateholders Exhibit N Form of Servicer Remittance Report - v - This Pooling and Servicing Agreement, dated and effective as of ______________, by and between ICIFC Securied Assets Corp., a California corporation, as Depositor, ________________________________, a ___________________________, as Master Servicer, ________________________________, a _____________________________, as Special Servicer, ________________________________, a _____________________________, as Trustee, and ________________________________, a _____________________________, as Fiscal Agent. 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 mortgage pass-through certificates, to be issued hereunder in multiple classes, which in the aggregate will evidence the entire beneficial ownership interest in the Mortgage Loans (as defined below). The Mortgage Loans will be serviced pursuant to the terms of this Agreement. The Depositor hereby assigns to the Trustee, acting on behalf of the Certificateholders, its interests and rights in the Mortgage Loans. On the Closing Date, the Depositor will acquire (i) the REMIC I Regular Interests and the Class R-I Certificates as consideration for its transfer to the Trustee of the Mortgage Loans and the other property constituting the Trust Fund; (ii) the REMIC II Regular Interests and the Class R-II Certificates as consideration for its transfer of the REMIC I Interests to the Trustee; and (iii) the REMIC III Certificates as consideration for its transfer of the REMIC II Regular Interests to the Trustee. The Depositor has duly authorized the execution and delivery of this Agreement to provide for the foregoing and the issuance of (a) the REMIC I Regular Interests and the Class R-I Certificates representing in the aggregate the entire beneficial ownership of REMIC I, (b) the REMIC II Regular Interests and the Class R-II Certificates representing in the aggregate the entire beneficial ownership of REMIC II and (c) the REMIC III Certificates, representing in the aggregate the entire beneficial ownership of REMIC III. All covenants and agreements made by the Depositor and the Trustee herein with respect to the Mortgage Loans and the other property constituting the Trust Fund are for the benefit of the Holders of the REMIC I Regular Interests, the REMIC II Regular Interests, and the Certificates. The parties hereto are entering into this Agreement, and the Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. The following sets forth the Class designation, Pass-Through Rate, and Original Class Balance (or Notional Amount) for each Class of REMIC I Regular Interests and the Class R-I Certificate comprising the interests in REMIC I, each Class of REMIC II Regular Interests and the Class R-II Certificate comprising the interests in REMIC II and each Class of REMIC III Certificates comprising the interests in REMIC III created hereunder: REMIC I Each REMIC I Interest (a "CORRESPONDING REMIC I INTEREST") will relate to a specific Mortgage Loan. Each Corresponding REMIC I Interest will have a Pass-Through Rate equal to the Remittance Rate of the related Mortgage Loan as of the Cut-off Date, and an initial principal balance (the initial "CLASS BALANCE") equal to the Scheduled Principal Balance as of the Cut-off Date of the Mortgage Loan to which the Corresponding REMIC I Interest relates. The Class R-I Certificate will be designated as the sole class of residual interests in REMIC I and will have no Class Balance and no Pass-Through Rate, but will be entitled to receive the proceeds of any assets remaining in REMIC I after all classes of REMIC I Regular Interests have been paid in full. REMIC II Each REMIC II Regular Interest has the Pass-Through Rate and Class Balance set forth in the definition thereof. The Class R-II Certificate will be designated as the sole class of residual interests in REMIC II and will have no Class Balance and no Pass-Through Rate, but will be entitled to receive the proceeds of any assets remaining in REMIC II after all classes of REMIC II Regular Interests have been paid in full. REMIC III The following table sets forth the designation, Pass-Through Rate and Original Class Balance (or in the case of Class X, Notional Amount) for each Class of Certificates comprising the interests in the Trust Fund created hereunder and each Class of REMIC III Certificates comprising the interests in REMIC III. Class Original Class Designation Pass-Through Rate Balance/Notional Amount - -------------------------------------------------------------------------------- Class A1 _____% $__________ Class A2 _____% _________ Class A3 _____% _________ Class B _____% _________ Class C _____% _________ Class D _____% _________ Class E _____% _________ Class F _____% _________ Class X _____% _________ Class G _____% _________ Class H _____% _________ Class J _____% _________ Class K _____% _________ Class L _____% _________ Class R-I _____% _________ Class R-II _____% _________ Class R-III _____% _________ As of close of business on the Cut-off Date, the Mortgage Loans had an aggregate Scheduled Principal Balance equal to $_________. As provided herein, with respect to the Trust Fund, the Trustee will make an election for the segregated pool of assets described in Section 2.06 and Section 4.04 hereof (including the Mortgage Loans) to be treated for federal income tax purposes as a real estate mortgage investment conduit ("REMIC I"). The REMIC I Regular Interests will be designated as the "regular interests" in - 2 - REMIC I and the Class R-I Certificates will be designated as the sole class of "residual interests" in REMIC I. As provided herein, with respect to the Trust Fund, the Trustee will make an election for the segregated pool of assets described in Section 2.06 and Section 4.04 hereof consisting of the REMIC I Regular Interests to be treated for federal income tax purposes as a real estate mortgage investment conduit ("REMIC II"). The REMIC II Regular Interest will be designated as the "regular interests" in REMIC II and the Class R-II Certificates will be designated as the sole class of "residual interests" in REMIC II for purposes of the REMIC Provisions. As provided herein, with respect to the Trust Fund, the Trustee will make an election for the segregated pool of assets described in Section 2.06 and Section 4.04 hereof consisting of the REMIC II Regular Interests to be treated for federal income tax purposes as a real estate mortgage investment conduit ("REMIC III"). The Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K and Class L Certificates and each Class X Component will be designated as the "regular interests" in REMIC III and the Class R-III Certificates will be designated as the sole class of "residual interests" in REMIC III for purposes of the REMIC Provisions. In consideration of the mutual agreements herein contained, the Depositor, the Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent agree as follows: - 3 - ARTICLE I DEFINITIONS ----------- SECTION 1.01 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. "ACCOUNTANT'S STATEMENT": As defined in Section 3.15. "ACT": The Securities Act of 1933, as it may be amended from time to time. "ACTUAL/360 MORTGAGE LOANS": The Mortgage Loans indicated as such in the Mortgage Loan Schedule. "ADJUSTED COLLATERAL VALUE": With respect to any Distribution Date, the excess of the outstanding principal balance of any Mortgage Loan over the related Collateral Value Adjustment. "ADVANCE": Any P&I Advance or Property Advance. "ADVANCE INTEREST AMOUNT": Interest at the Advance Rate on the aggregate amount of P&I Advances and Property Advances for which the Master Servicer, the Trustee or the Fiscal Agent, as applicable, has not been reimbursed and Trustee Fees for which the Trustee has not been timely paid or reimbursed for the number of days from the date on which such Advance was made or such Trustee Fees were due through the date of payment or reimbursement of the related Advance or other such amount, less any amount of interest previously paid on such Advance or Trustee Fees; PROVIDED, that, with respect to a P&I Advance, in the event that the related Mortgagor makes payment of the amount in respect of which such P&I Advance was made with interest at the Default Rate, or pays a late payment charge, the Advance Interest Amount payable to the Master Servicer, the Trustee or the Fiscal Agent shall be paid (i) first from the amount of Default Interest and late payment charges paid by the Mortgagor and (ii) to the extent such amounts are insufficient therefor, from amounts on deposit in the Collection Account. "ADVANCE RATE": A per annum rate equal to the sum of (i) the Prime Rate (as most recently published in the "Money Rates" section of The Wall Street Journal, New York edition) plus (ii) ____%, compounded monthly as of each Remittance Date. Interest at the Advance Rate will accrue from (and including) the date on which the related Advance is made or the related expense incurred to (but excluding) the date on which such amounts are recovered out of amounts received on the Mortgage Loan as to which such Advances were made or servicing expenses incurred or the date on which a determination of non-recoverability is made, as the case may be, PROVIDED that such interest at the Advance Rate will continue to accrue to the extent funds are not available in the Collection Account for reimbursement of such Advance. "AFFILIATE": With respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, - 4 - "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. The Trustee may obtain and rely on an Officers' Certificate of the Master Servicer, the Special Servicer, or the Depositor to determine whether any Person is an Affiliate of such party. "AFFILIATED PERSON": Any Person (other than a Rating Agency) involved in the organization or operation of the Depositor or an affiliate, as defined in Rule 405 of the Act, of such Person. "AGENT MEMBER": Members of, or participants in, the Depository. "AGREEMENT": This Pooling and Servicing Agreement and all amendments hereof and supplements hereto. "ALLOCATED LOAN AMOUNT": With respect to each Mortgaged Property, the portion of the principal amount of the related Mortgage Loan allocated to such Mortgaged Property in the applicable Mortgage or Loan Agreement. "ANNUAL COMPLIANCE REPORT": A report consisting of an annual statement of compliance required by Section 3.14 hereof and the Accountant's Statement delivered pursuant to Section 3.15 hereof. "ANTICIPATED REPAYMENT DATE": With respect to any Mortgage Loan that is indicated on the Mortgage Loan Schedule as having a Revised Rate, the date upon which such Mortgage Loan commences accruing interest at such Revised Rate. "ASSET STATUS REPORT": The report prepared pursuant to Section 3.29(m). "ASSIGNMENT OF LEASES AND RENTS": With respect to any Mortgaged Property, any assignment of leases, rents and profits or similar agreement executed by the Mortgagor, 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, as amended, modified, renewed or extended through the date hereof and from time to time hereafter. "ASSIGNMENT OF MORTGAGE": An assignment of Mortgage without recourse, notice of transfer or equivalent instrument, in recordable form, which is sufficient under the laws of the jurisdiction in which the related Mortgaged Property is located to reflect of record the sale of the Mortgage, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering Mortgages encumbering Mortgaged Properties located in the same jurisdiction, if permitted by law and acceptable for recording; PROVIDED, HOWEVER, that none of the Trustee, the Custodian, the Special Servicer and the Master Servicer shall be responsible for determining whether any assignment is legally sufficient or in recordable form. - 5 - "ASSUMED MATURITY DATE": With respect to any Mortgage Loan that is not a Balloon Mortgage Loan, the maturity date of such Mortgage Loan. With respect to any Balloon Mortgage Loan, the date on which such Mortgage Loan would be deemed to mature in accordance with its original amortization schedule absent its Balloon Payment. "ASSUMED MONTHLY PAYMENT": With respect to any Due Date and a Balloon Mortgage Loan, the principal payment that would need to be received on such Due Date in order to fully amortize such Balloon Mortgage Loan with level monthly payments by the end of the term used to derive scheduled payments of principal due prior to the related Maturity Date. "ASSUMPTION FEES": Any fees collected by the Master Servicer, any subservicer or the Special Servicer in connection with an assumption or modification of a Mortgage Loan or substitution of a Mortgagor thereunder permitted to be executed under the provisions of this Agreement. "AUTHENTICATING AGENT": Any authenticating agent appointed by the Trustee pursuant to Section 3.20. "AVAILABLE DISTRIBUTION AMOUNT": With respect to any Distribution Date, an amount equal to (a) the sum of (i) the amount on deposit in the Collection Account as of the close of business on the related Determination Date, which amount will include scheduled payments on the Mortgage Loans due on or prior to the related Due Date immediately preceding, and collected as of, such Determination Date (to the extent not distributed on previous Distribution Dates) and unscheduled payments and other collections on the Mortgage Loans collected during the related Prepayment Period and (ii) the aggregate amount of any P&I Advances made by the Master Servicer, the Trustee or the Fiscal Agent in respect of such Distribution Date (not otherwise included in clause (i) above) net of (b) the portion of the amount described in clause (a)(i) hereof that represents (1) Monthly Payments due on a Due Date subsequent to the end of the related Prepayment Period, and (2) any amounts payable or reimbursable therefrom to any Servicer or the Trustee or the Fiscal Agent as compensation or otherwise, and (3) any amounts to be withdrawn pursuant to Section 3.06(vi) and (x). "BALLOON MORTGAGE LOAN": Any Mortgage Loan that by its original terms or by virtue of any modification provides for an amortization schedule extending beyond its Maturity Date. "BALLOON PAYMENT": With respect to any Balloon Mortgage Loan as of any date of determination, the amount outstanding on the Maturity Date of such Mortgage Loan in excess of the related Monthly Payment. "BASE INTEREST FRACTION": With respect to any Principal Prepayment on any Mortgage Loan and with respect to any Class of Offered Certificates, a fraction (A) the numerator of which is the greater of (x) zero and (y) the excess of (i) the Pass-Through Rate on such Class of Offered Certificates over (ii) the sum of the discount rate used in accordance with the related Loan Documents in calculating the Yield Maintenance Charge with respect to such principal prepayment and the Spread Rate for such Class of Offered Certificates, and (B) the denominator of which is the excess of (i) the Mortgage Interest Rate on the related Mortgage Loan over (ii) the discount rate used - 6 - in accordance with the related Loan Documents 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 discount rate is greater than the Mortgage Interest Rate on the related Mortgage Loan, then the Base Interest Fraction shall equal zero. "BENEFICIAL OWNER": With respect to a Global Certificate, the Person who is the beneficial owner of such Certificate as reflected on the books of the Depository or on the books of a Person maintaining an account with such Depository (directly as a Depository Participant or indirectly through a Depository Participant, in accordance with the rules of such Depository). Each of the Trustee, the Special Servicer and the Master Servicer shall have the right to require, as a condition to acknowledging the status of any Person as a Beneficial Owner under this Agreement, that such Person provide evidence at its expense of its status as a Beneficial Owner hereunder. "BOOK-ENTRY CERTIFICATE": Any Certificate registered in the name of the Depository or its nominee. "BREACH": As defined in Section 2.03(b). "BUSINESS DAY": Any day other than a Saturday, a Sunday or any day on which banking institutions in the City of New York, New York, the City of Chicago, Illinois, the State of Georgia, the State of Missouri or the State of Texas are authorized or obligated by law, executive order or governmental decree to be closed. "CASH COLLATERAL ACCOUNT": With respect to any Mortgage Loan that has a Lock-Box Account, any account or accounts created pursuant to the related Mortgage, Loan Agreement, Cash Collateral Account Agreement or other loan document into which the Lock-Box Account monies are swept on a regular basis for the benefit of the Trustee as successor to the applicable Seller. Any Cash Collateral Account shall be beneficially owned for federal income tax purposes by the Person who is entitled to receive all reinvestment income or gain thereon in accordance with the terms and provisions of the related Mortgage Loan and Section 3.07, which Person shall be taxed on all reinvestment income or gain thereon. The Master Servicer shall be permitted to make withdrawals therefrom for deposit into the Collection Account in accordance with the terms of the related Mortgage Loan. To the extent not inconsistent with the terms of the related Mortgage Loan, each such Cash Collateral Account shall be an Eligible Account. "CASH COLLATERAL ACCOUNT AGREEMENT": With respect to any Mortgage Loan, the cash collateral account agreement, if any, between the Originator and the related Mortgagor, pursuant to which the related Cash Collateral Account, if any, may have been established. "CERTIFICATE": Any Class A1, Class A2, Class A3, Class B, Class C, Class D, Class E, Class F, Class X, Class G, Class H, Class J, Class K, Class L, Class R-I, Class R-II or Class R-III Certificate issued, authenticated and delivered hereunder. "CERTIFICATE ACCOUNT": The trust account or accounts created and maintained as a separate trust account or accounts by the Trustee pursuant to Section 3.05(b), which shall be entitled "___________________, as Trustee, in trust for Holders of ICIFC Secured Assets Corp., Mortgage - 7 - Pass-Through Certificates, Series 199__-__, Certificate Account" and which must be an Eligible Account. "CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR": The register maintained and the registrar appointed pursuant to Section 5.02. "CERTIFICATEHOLDER": The Person whose name is registered in the Certificate Register subject to the following: (i) except as provided in clause (ii) and (iv), for the purpose of giving any consent or taking any action pursuant to this Agreement, any Certificate beneficially owned by the Depositor, the Master Servicer, the Special Servicer, the Trustee, a Manager or a Mortgagor or any Person known to a Responsible Officer of the Certificate Registrar to be an Affiliate of any thereof shall be deemed not to be outstanding and the Voting Rights to which it is entitled shall not be taken into account in determining whether the requisite percentage of Voting Rights necessary to effect any such consent or take any such action has been obtained, PROVIDED, HOWEVER, that this provision shall not be applicable to the current Master Servicer or Special Servicer or any Affiliate thereof in the event either the Master Servicer or Special Servicer is not serving in such capacity at the time any such actions or action is subject to a vote; (ii) for purposes of obtaining the consent of Certificateholders to an amendment of this Agreement, any Certificates beneficially owned by the Master Servicer or the Special Servicer or an Affiliate thereof shall be deemed to be outstanding and entitled to exercise Voting Rights, unless such amendment relates to an increase in the compensation of the Master Servicer or the Special Servicer or benefits the Master Servicer or the Special Servicer (in its capacity as such) or any Affiliate thereof (other than solely in its capacity as Certificateholder) in any material respect, in which case such Certificates shall be deemed not to be outstanding; (iii) except as provided in clause (iv) below, for purposes of obtaining the consent of Certificateholders to any action proposed to be taken by the Special Servicer with respect to a Mortgage Loan, any Certificates beneficially owned by the Special Servicer or an Affiliate thereof shall be deemed not to be outstanding; (iv) for purposes of determining who the Monitoring Certificateholders are, Certificates owned by the Master Servicer, Special Servicer or an Affiliate of either of them shall be deemed to be outstanding and entitled to exercise Voting Rights for election of the Controlling Class Representative; and (v) for purposes of providing or distributing any reports, statements or other information required or permitted to be provided to a Certificateholder hereunder, a Certificateholder shall include any Beneficial Owner, or any Person identified by a Beneficial Owner as a prospective transferee of a Certificate beneficially owned by such Beneficial Owner, but only if the Trustee or another party hereto furnishing such report, statement or information has been provided with the name of the Beneficial Owner of the related - 8 - Certificate or the Person identified as a prospective transferee thereof. For purposes of the foregoing, the Depositor, the Master Servicer, the Special Servicer, the Trustee, the Paying Agent, the Fiscal Agent or other such Person may rely, without limitation, on a participant listing from the Depository or statements furnished by a Person that on their face appear to be statements from a participant in the Depository to such Person indicating that such Person beneficially owns Certificates. "CLASS": With respect to the Certificates, or REMIC II Regular Interests, all of the Certificates, or REMIC II Regular Interests bearing the same alphabetical and/or numerical Class designation. "CLASS A1 CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS A2 CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS A3 CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS B CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS BALANCE": With respect to any Class of Certificates or Interests (other than the Class X Certificates) (a) on or prior to the first Distribution Date, an amount equal to the Original Class 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 Class Balance of such Class of Certificates or Interests on the Distribution Date immediately prior to such date of determination after application of the distributions and Realized Losses (and, with respect to determination of Voting Rights hereunder, Collateral Value Adjustments) allocable to principal made thereon on such prior Distribution Date. "CLASS C CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS D CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS E CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS F CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS G CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS H CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS J CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS K CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS L CERTIFICATE": Any of the Certificates issued hereunder and designated as such. - 9 - "CLASS R-I CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS R-II CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS R-III CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS X CERTIFICATE": Any of the Certificates issued hereunder and designated as such. "CLASS X COMPONENT": With respect to the Class X Certificates, any of the Class X-A-1 Component, the Class X-A-2 Component, the Class X-A-3 Component, the Class X-B Component, the Class X-C Component, the Class X-D Component, the Class X-E Component, the Class X-F Component, the Class X-G Component, the Class X-H Component, the Class X-J Component, the Class X-K Component or the Class X-L Component. "CLASS X-A-1 COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-A-2 COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-A-3 COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-B COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-C COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-D COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-E COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-F COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. - 10 - "CLASS X-G COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-H COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-J COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-K COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "CLASS X-L COMPONENT": The regular interest issued by REMIC III, constituting one of the Class X Components, representing interest at the related Component Strip Rate on the related Notional Amount. "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. "COLLATERAL VALUE ADJUSTMENT": With respect to a Mortgage Loan as to which a Collateral Value Adjustment Event has occurred, an amount equal to the excess of (a) the sum of (i) the Scheduled Principal Balance of the Mortgage Loan as of the date of the Collateral Value Adjustment Event and (ii) the sum of (A) all unpaid interest on such Mortgage Loan at a per annum rate equal to the Mortgage Interest Rate, (B) all unreimbursed Property Advances and interest thereon at the Advance Rate, (C) any unpaid Servicing Fees and Trustee Fees and any unpaid interest on any P&I Advances and (D) all currently due and delinquent real estate taxes and assessments, insurance premiums and, if applicable, ground rents in respect of any such Mortgaged Property (net of any amount escrowed or otherwise available for payment of any amounts due on the related Mortgage Loan or REO Property) over (b) ____% of the current appraised value of the related Mortgaged Property as determined by an Independent MAI appraisal thereof. "COLLATERAL VALUE ADJUSTMENT EVENT": With respect to any Specially Serviced Mortgage Loan, the date the Special Servicer obtains an Updated Appraisal, which date shall be within 60 days after the earliest to occur of (i) 60 days after the date on which an uncured Delinquency occurs in respect of such Mortgage Loan, (ii) 60 days after the date on which a receiver is appointed (if such appointment remains in effect during such 60-day period) in respect of the related Mortgaged Property, (iii) the date on which the related Mortgaged Property becomes an REO Property or such earlier date as is reasonably practicable, (iv) the date on which the payment rate, Mortgage Interest Rate, principal balance, amortization term or Maturity Date of such Mortgage Loan has been - 11 - changed or otherwise materially modified pursuant to and in accordance with the terms hereof, (v) the Maturity Date of such Mortgage Loan if not paid in full on or prior to such date, or (vi) 60 days following the filing of a voluntary petition in bankruptcy by the related Mortgagor or an involuntary petition in bankruptcy not dismissed within a reasonable amount of time; PROVIDED, that with respect to any Specially Serviced Mortgage Loan for which such an appraisal has been obtained within the preceding 12 months, the Collateral Value Adjustment Event shall be the date of any occurrence described in (i) - (vi). "COLLECTION ACCOUNT": The trust account or accounts created and maintained by the Master Servicer pursuant to Section 3.05(a), which shall be entitled "_______________________, in trust for ____________________, as Trustee, in trust for Holders of ICIFC Secured Assets Corp., Mortgage Pass-Through Certificates, Series 199__-__, Collection Account" and which must be an Eligible Account, together with any like account maintained by a subservicer which shall also be an Eligible Account. "COLLECTION PERIOD": With respect to a Distribution Date, the period beginning on the day after the Due Date, in the month preceding the month in which such Distribution Date occurs (or, in the case of the initial Distribution Date, on the day after the Cut-off Date) and ending at the close of business on the Due Date, in the month in which such Distribution Date occurs. "COMMISSION": The Securities and Exchange Commission. "COMPONENT STRIP RATE": With respect to each Class X Component and any Distribution Date, the excess of (i) the Weighted Average Remittance Rate for such Distribution Date over (ii) the Pass-Through Rate of the Corresponding Certificate for such Distribution Date. "CONTROLLING CLASS REPRESENTATIVE": The Monitoring Certificateholder selected by a majority of the Monitoring Certificateholders, by Class Balance, as certified by the Trustee from time to time; PROVIDED, that, absent such selection, or (i) until a Controlling Class Representative is so selected, or (ii) upon receipt of notice from a majority of the Monitoring Certificateholders, by Class Balance, that a Controlling Class Representative is no longer so designated, the Monitoring Certificateholder which owns the largest aggregate Class Balance of the Monitoring Class shall be the Controlling Class Representative. "CORPORATE TRUST OFFICE": The principal office of the Trustee located at _________________________________, Attention: Asset-Backed Securities, ICIFC 199__-__,or the principal trust office of any successor trustee qualified and appointed pursuant to Section 8.08. I "CORRESPONDING CERTIFICATE": With respect to the Class X-A-1 Component the Class A1 Certificate, Class X-A-2 Component the Class A2 Certificate, Class X-A-3 Component the Class A3 Certificate, Class X-B Component the Class B Certificate, Class X-C Component the Class C Certificate, Class X-D Component the Class D Certificate, Class X-E Component the Class E Certificate, Class X-F Component the Class F Certificate, Class X-G Component the Class G Certificate, Class X-H Component the Class H Certificate, Class X-J Component the Class J Certificate, Class X-K Component the Class K Certificate and Class X-L Component the Class L Certificate. - 12 - "CORRESPONDING REMIC I REGULAR INTEREST": With respect to each Mortgage Loan, the REMIC I Interest having an initial Class Balance equal to the principal balance of such Mortgage Loan outstanding as of the Cut-off Date, after taking into account all principal and interest payments made or due prior to the Cut-off Date. "CORRESPONDING REMIC II REGULAR INTEREST": With respect to each Class of Certificates (other than the Class X, Class R-I, Class R-II and Class R-III Certificates), the REMIC II Regular Interest having the same letter designation. "CUSTODIAL AGREEMENT": The Custodial Agreement, if any, from time to time in effect between the Custodian named therein and the Trustee, in a form acceptable to the Trustee, as the same may be amended or modified from time to time in accordance with the terms thereof. "CUSTODIAN": Any Custodian appointed pursuant to Section 3.21 and, unless the Trustee is Custodian, named pursuant to any Custodial Agreement. The Custodian may (but need not) be the Trustee or the Master Servicer or any Affiliate of the Trustee or the Master Servicer, but may not be the Depositor or any Affiliate thereof. "CUT-OFF DATE": _________. "DEFAULT INTEREST": With respect to any Mortgage Loan, interest accrued on such Mortgage Loan at the excess of the Default Rate over the Mortgage Interest Rate (plus the Excess Rate to the extent required by the applicable Mortgage Loan). The Default Interest shall be an asset of the Trust Fund but shall not be an asset of REMIC I, REMIC II or REMIC III formed hereunder. "DEFAULT RATE": With respect to each Mortgage Loan, the per annum rate at which interest accrues on such Mortgage Loan following any event of default on such Mortgage Loan, including a default in the payment of a Monthly Payment or a Balloon Payment, as such rate is set forth on the Mortgage Loan Schedule. "DEFAULTED MORTGAGE LOAN": Any Mortgage Loan which is more than 60 days delinquent in whole or in part in respect of any Monthly Payment or is delinquent in whole or in part in respect to the related Balloon Payment, if any; PROVIDED that for purposes of this definition, no Monthly Payment (other than a Balloon Payment) shall be deemed delinquent if less than five dollars ($5.00) of all amounts due and payable on such Mortgage Loan has not been received as of the most recent Due Date therefor. "DEFECT": As defined in Section 2.02(e). "DEFICIENT VALUATION": With respect to any Mortgage Loan, a valuation by a court of competent jurisdiction of the Mortgaged Property in an amount less than the then outstanding principal balance of the Mortgage Loan, or any reduction in the amount of principal to be paid in connection with any scheduled Monthly Payment that constitutes a permanent forgiveness of principal, which valuation results from a proceeding initiated under the federal Bankruptcy Code, as amended from time to time (Title 11 of the United States Code), or a state court deficiency proceeding. - 13 - "DEFINITIVE CERTIFICATE": Any certificated, fully registered Certificate. "DELINQUENCY": Any failure of a Mortgagor to make a scheduled payment on a Due Date. "DEPOSITOR": ICIFC Secured Assets Corp., a California corporation, and its successors and assigns. "DEPOSITORY": The Depository Trust Company, a nominee of which is Cede & Co., or a successor appointed by the Certificate Registrar (which appointment shall be at the direction of the Depositor if the Depositor is legally able to do so). "DEPOSITORY PARTICIPANT": A Person for whom, from time to time, the Depository effects book-entry transfers and pledges of securities deposited with the Depository. "DETERMINATION DATE": With respect to any Distribution Date, the 12th day of each month in which such Distribution Date occurs or, if such 12th day is not a Business Day, the immediately preceding Business Day, beginning in ______________. "DIRECTLY OPERATE": With respect to any REO Property, the furnishing or rendering of services to the tenants thereof that are not customarily provided to tenants in connection with the rental of space for occupancy only within the meaning of Treasury Regulations Section 1.512(h)-1(c)(5), the management or operation of such REO Property, the holding of such REO Property primarily for sale to customers in the ordinary course of a trade or business, any use of such REO Property in a trade or business conducted by the Trust Fund, or the performing of any construction work on the REO Property other than through an Independent Contractor; PROVIDED, HOWEVER, that the Special Servicer, on behalf of the Trust Fund, shall not be considered to Directly Operate an REO Property solely because the Special Servicer, on behalf of the Trust Fund, establishes rental terms, chooses tenants, enters into or renews leases, deals with taxes and insurance, makes decisions as to repairs or capital expenditures with respect to such REO Property or takes other actions consistent with Section 1.856-4(b)(5)(ii) of the regulations of the United States Department of the Treasury. "DISQUALIFIED NON-U.S. PERSON": With respect to a Class R-I, Class R-II or Class R-III Certificate, any Non-U.S. Person or agent thereof other than (i) a Non-U.S. Person that holds the Class R-I, Class R-II or Class R-III Certificate in connection with the conduct of a trade or business within the United States and has furnished the transferor and the Certificate Registrar with an effective IRS Form 4224 or (ii) a Non-U.S. Person that has delivered to both the transferor and the Certificate Registrar an opinion of a nationally recognized tax counsel to the effect that the transfer of the Class R-I, Class R-II or Class R-III Certificate to it is in accordance with the requirements of the Code and the regulations promulgated thereunder and that such transfer of the Class R-I, Class R-II or Class R-III Certificate will not be disregarded for federal income tax purposes. "DISQUALIFIED ORGANIZATION": Either (a) the United States, a State or any political subdivision thereof, any possession of the United States, or any agency or instrumentality of any of the foregoing (other than an instrumentality that is a corporation if all of its activities are subject to tax and a majority of its board of directors is not selected by any such governmental unit), (b) a foreign government, International Organization or agency or instrumentality of either of the foregoing, (c) - 14 - an organization that is exempt from tax imposed by Chapter 1 of the Code (including the tax imposed by Code Section 511 on unrelated business taxable income) on any excess inclusions (as defined in Code Section 860E(c)(1)) with respect to the Class R-I, Class R-II or Class R-III 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 REMIC I, REMIC II or REMIC III to be subject to tax or to fail to qualify as a REMIC at any time that the Certificates are outstanding. The terms "United States," "State" and "International Organization" shall have the meanings set forth in Code Section 7701 or successor provisions. "DISTRIBUTION DATE": The ____ day of each month, or if such ____ day is not a Business Day, the Business Day immediately following such ____ day, commencing in ______________. "DUE DATE": With respect to any Distribution Date and/or any Mortgage Loan, as the case may be, the 1st day of the month in which such Distribution Date occurs. "EARLY TERMINATION NOTICE DATE": Any date as of which the aggregate Scheduled Principal Balance of the Mortgage Loans is less than ____% of the aggregate Scheduled Principal Balance of the Mortgage Loans as of the Cut-off Date. "ELIGIBLE ACCOUNT": Either (i) (A) an account or accounts maintained with a depository institution or trust company the long term unsecured debt obligations of which are rated at least "AA" by each of the Rating Agencies or, if the funds in such account are to be held in such account for less than 30 days, the short term obligations of which are rated by each of the Rating Agencies in its highest short-term rating category at all times, or (B) as to which the Trustee has received written confirmation from each of the Rating Agencies that holding funds in such account would not cause any Rating Agency to qualify, withdraw or downgrade any of its ratings on the Certificates or (ii) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company is subject to regulations substantially similar to 12 C.F.R. ss. 9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and state authority, or otherwise acceptable to each Rating Agency (as evidenced by a written confirmation from each Rating Agency that such account would not, in and of itself, cause a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates), which may be an account maintained with the Trustee or the Master Servicer. Eligible Accounts may bear interest. "ELIGIBLE INVESTOR": Any of (i) a Qualified Institutional Buyer that is purchasing for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the offer, sale or transfer is being made in reliance on Rule 144A or (ii) an Institutional Accredited Investor. "ENVIRONMENTAL REPORT": The environmental audit report or reports with respect to each Mortgaged Property delivered to the Seller in connection with the related Mortgage. - 15 - "ERISA": The Employee Retirement Income Security Act of 1974, as it may be amended from time to time. "ESCROW ACCOUNT": As defined in Section 3.04(b). Any Escrow Account may be a sub- account of the related Cash Collateral Account. "ESCROW PAYMENT": Any payment made by any Mortgagor to the Master Servicer pursuant to the related Mortgage, Cash Collateral Agreement, Lock-Box Agreement or Loan Agreement for the account of such Mortgagor for application toward the payment of taxes, insurance premiums, assessments and similar items in respect of the related Mortgaged Property. "EVENT OF DEFAULT": A Master Servicer Event of Default or Special Servicer Event of Default, as applicable. "EXCESS INTEREST": With respect to each of the Mortgage Loans indicated on the Mortgage Loan Schedule as having a Revised Rate, interest accrued on such Mortgage Loan allocable to the Excess Rate. The Excess Interest shall not be an asset of REMIC I or REMIC II formed hereunder. "EXCESS RATE": With respect to each of the Mortgage Loans indicated on the Mortgage Loan Schedule as having a Revised Rate, the excess of (i) the applicable Revised Rate over (ii) the applicable Mortgage Interest Rate, each as set forth in the Mortgage Loan Schedule. "EXCHANGE ACT": The Securities Exchange Act of 1934, as amended. "EXCHANGE ACT REPORT": A Monthly Distribution Statement or Special Event Report to be filed with the Commission, under cover of the related form required by the Exchange Act. "FDIC": The Federal Deposit Insurance Corporation, or any successor thereto. "FHA": The Federal Housing Administration. "FHLMC": The Federal Home Loan Mortgage Corporation, or any successor thereto. "FINAL RECOVERY DETERMINATION": With respect to any Specially Serviced Mortgage Loan or Mortgage Loan subject to repurchase by the applicable Seller pursuant to Section 2.03(b), the recovery of all Insurance Proceeds, Liquidation Proceeds, the related Repurchase Price and other payments or recoveries (including proceeds of the final sale of any REO Property) which the Master Servicer (or in the case of a Specially Serviced Mortgage Loan, the Special Servicer), in its reasonable judgment as evidenced by a certificate of a Servicing Officer delivered to the Trustee, the Custodian and the other Servicer, expects to be finally recoverable. The Master Servicer shall maintain records, prepared by a Servicing Officer, of each Final Recovery Determination until the earlier of (i) its termination as Master Servicer hereunder and the transfer of such records to a successor servicer and (ii) five years following the termination of the Trust Fund. - 16 - "FISCAL AGENT": _________________________, a _____________________________, in its capacity as fiscal agent of the Trustee, or its successor in interest, or any successor fiscal agent appointed as herein provided. "FITCH": Fitch Investors Service, L.P., or its successor in interest. "FORM 8-K": A Current Report on Form 8-K under the Exchange Act, or such successor form as the Commission may specify from time to time. "FNMA": The Federal National Mortgage Association, or any successor thereto. "GLOBAL CERTIFICATES": The Class A1, Class A2, Class A3, Class B, Class C, Class D, Class E, Class F, Class X, Class G, Class H, Class J, Class K and Class L Certificates. "HAZARDOUS MATERIALS": Any dangerous, toxic or hazardous pollutants, chemicals, wastes, or substances, including, without limitation, those so identified pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 ET SEQ., or any other environmental laws now existing, and specifically including, without limitation, asbestos and asbestos-containing materials, polychlorinated biphenyls ("PCBS"), radon gas, petroleum and petroleum products, urea formaldehyde and any substances classified as being "in inventory", "usable work in process" or similar classification which would, if classified as unusable, be included in the foregoing definition. "HOLDER": With respect to any Certificate, a Certificateholder; with respect to any REMIC I Regular Interest or REMIC II Regular Interest, the Trustee. "INDEMNIFIED PARTY": As defined in Section 8.05(c). "INDEPENDENT": When used with respect to any specified Person, any such Person who (i) does not have any direct financial interest, or any material indirect financial interest, in any of the Depositor, the Trustee, the Master Servicer, the Special Servicer, any Mortgagor or Manager or any Affiliate thereof, and (ii) is not connected with any such Person thereof as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions. "INDEPENDENT CONTRACTOR": Either (i) any Person that would be an "independent contractor" with respect to the Trust Fund within the meaning of Section 856(d)(3) of the Code if the Trust Fund were a real estate investment trust (except that the ownership tests set forth in that Section shall be considered to be met by any Person that owns, directly or indirectly, 35% or more of any Class or 35% or more of the aggregate value of all Classes of Certificates), PROVIDED that the Trust Fund does not receive or derive any income from such Person and the relationship between such Person and the Trust Fund is at arm's length, all within the meaning of Treasury Regulations Section 1.856-4(b)(5) (except neither the Master Servicer nor the Special Servicer shall be considered to be an Independent Contractor under the definition in this clause (i) unless an Opinion of Counsel (at the expense of the party seeking to be deemed an Independent Contractor) addressed to the Master Servicer and the Trustee has been delivered to the Trustee to that effect) or (ii) any other Person (including the Master Servicer and the Special Servicer) if the Master Servicer, on behalf of itself and the Trustee, has - 17 - received an Opinion of Counsel (at the expense of the party seeking to be deemed an Independent Contractor) to the effect that the taking of any action in respect of any REO Property by such Person, subject to any conditions therein specified, that is otherwise herein contemplated to be taken by an Independent Contractor will not cause such REO Property to cease to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code (determined without regard to the exception applicable for purposes of Section 860D(a) of the Code) or cause any income realized in respect of such REO Property to fail to qualify as Rents from Real Property (provided that such income would otherwise so qualify). "INITIAL PURCHASER": ______________________. "INSTITUTIONAL ACCREDITED INVESTOR": An entity meeting the requirements of Rule 501(a)(1), (2), (3) or (7) of Regulation D, or an entity in which all the equity owners meet such requirements. "INSURANCE PROCEEDS": Proceeds of any fire and hazard insurance policy, title policy or other insurance policy relating to a Mortgage Loan (including any amounts paid by the Master Servicer pursuant to Section 3.08). "INTEREST": A REMIC I Interest or a REMIC II Interest, as applicable. "INTEREST ACCRUAL AMOUNT": With respect to each Distribution Date and any Class (other than the Class X Certificates and the Residual Certificates), interest (calculated on the basis of a 360-day year consisting of twelve 30-day months) accrued during the Interest Accrual Period on the Class Balance outstanding immediately prior to such Distribution Date at the Pass-Through Rate then applicable to such Class for such Distribution Date. With respect to the Class X Certificates, and each Distribution Date, the Interest Accrual Amount will be equal to the excess of (a) an amount equal to the product of (1) one-twelfth of the Weighted Average Remittance Rate times (2) the aggregate Scheduled Principal Balance of the Mortgage Loans immediately prior to the Due Date preceding such Distribution Date, over (b) an amount equal to the sum of one-twelfth of each of the products of the Pass-Through Rates of the Certificates (other than the Class X Certificates) with respect to such Distribution Date multiplied in each case by the Class Balances of the related Certificates immediately prior to such Distribution Date, calculated on the basis of a 360-day year consisting of twelve 30-day months. "INTEREST ACCRUAL PERIOD": With respect to any Distribution Date, the period from and including the first day of the month preceding the month of such Distribution Date (or from and including ______________ in the case of the initial Distribution Date) to and including the last day of the month preceding the month of such Distribution Date (or to and including ______________ in the case of the initial Distribution Date). "INTEREST DISTRIBUTION AMOUNT": With respect to each Distribution Date and any Class of Certificates (other than the Residual Certificates), the Interest Accrual Amount for such Distribution Date reduced by the product of (i) the Net Aggregate Prepayment Interest Shortfall for such Distribution Date and (ii) the Interest Accrual Amount on such Class divided by the Interest Accrual Amount for all such Classes of Certificates for such Distribution Date. - 18 - "INTERESTED PERSON": As of any date of determination, the Depositor, the Master Servicer, the Special Servicer, the Trustee, the Fiscal Agent, any Mortgagor, any manager of a Mortgaged Property, any Independent Contractor engaged by the Special Servicer pursuant to Section 3.17, or any Person known to a Responsible Officer of the Trustee to be an Affiliate of any of them. "INVESTMENT ACCOUNT": As defined in Section 3.07(a). "IRS": The Internal Revenue Service. "LIQUIDATION EVENT": With respect to any Mortgage Loan, any of the following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery Determination is made with respect to such Mortgage Loan; (iii) such Mortgage Loan is repurchased by either Seller pursuant to Section 2.03; or (iv) such Mortgage Loan is purchased by the Master Servicer, the Special Servicer, the holders of an aggregate Percentage Interest in excess of 50% of the Most Subordinate Class of Certificates or any holder of a Class R-I Certificate pursuant to Section 9.01. "LIQUIDATION EXPENSES": Expenses incurred by the Master Servicer, the Special Servicer and the Trustee in connection with the liquidation of any Mortgage Loan or property acquired in respect thereof (including, without limitation, legal fees and expenses, committee or referee fees, and, if applicable, brokerage commissions, and conveyance taxes) and any other Property Advances incurred with respect to such Mortgage Loan or such property, including interest thereon at the Advance Rate not previously reimbursed from collections or other proceeds therefrom. "LIQUIDATION PROCEEDS": The amount (other than Insurance Proceeds) received in connection with (i) the taking of a Mortgaged Property (or portion thereof) by exercise of the power of eminent domain or condemnation, (ii) the liquidation of a Specially Serviced Mortgage Loan through a trustee's sale, foreclosure sale or otherwise or (iii) a sale of a Mortgage Loan or an REO Property in accordance with Section 3.18 or Section 9.01. "LOAN AGREEMENT": With respect to any Mortgage Loan, the loan agreement, if any, between the Originator and the Mortgagor, pursuant to which such Mortgage Loan was made. "LOAN DOCUMENTS": With respect to any Mortgage Loan, the documents executed or delivered in connection with the origination of such Mortgage Loan or subsequently added to the related Mortgage Loan File. "LOAN NUMBER": With respect to any Mortgage Loan, the loan number by which such Mortgage Loan was identified on the books and records of the Depositor or any subservicer for the Depositor, as set forth in the Mortgage Loan Schedule. "LOCK-BOX ACCOUNT": With respect to any Mortgaged Property, if applicable, any account created pursuant to any documents relating to a Mortgage Loan to receive income therefrom. Any Lock-Box Account shall be beneficially owned for federal income tax purposes by the Person who is entitled to receive the reinvestment income or gain thereon in accordance with the terms and provisions of the related Mortgage Loan and Section 3.07, which Person shall be taxed on all - 19 - reinvestment income or gain thereon. The Master Servicer shall be permitted to make withdrawals therefrom for deposit into the related Cash Collateral Accounts. "LOCK-BOX AGREEMENT": With respect to any Mortgage Loan, the lock-box agreement, if any, between the Originator or the Seller and the Mortgagor, pursuant to which the related Lock-Box Account, if any, may have been established. "LOCK-OUT DATE": With respect to any Lock-out Period, the date of expiration thereof. "LOCK-OUT PERIOD": With respect to any Mortgage Loan, the period of time specified in the related Loan Documents during which voluntary prepayments by the related Mortgagor are prohibited. "LOSS MORTGAGE LOAN": Any Mortgage Loan (a) as to which a Liquidation Event has occurred, (b) with respect to which the Master Servicer, the Trustee or the Fiscal Agent has determined that an Advance previously made or proposed to be made is a Nonrecoverable Advance or (c) with respect to which a Deficient Valuation has been made or a portion of the principal balance thereof has been otherwise permanently forgiven. "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 Mortgagor, or any successor Management Agreement between such parties. "MANAGER": With respect to any Mortgage Loan, any property manager for the related Mortgaged Properties. "MASTER SERVICER": ___________________________, a _________________________, its successor in interest, or any successor servicer appointed as such as herein provided. "MASTER SERVICER EVENT OF DEFAULT": As defined in Section 7.01(a). "MATURITY DATE": With respect to each Mortgage Loan, the Maturity Date as set forth on the Mortgage Loan Schedule. "MONITORING CERTIFICATEHOLDERS": Each Holder (or Beneficial Owner, if applicable) of a Certificate of the Monitoring Class as certified to the Trustee from time to time by such Holder or Beneficial Owner. "MONITORING CLASS": As of any time of determination, the Class of Certificates outstanding representing the most subordinate Certificates (other than the Class R-I, Class R-II or Class R-III Certificates) that equals at least 25% of its Original Class Balance (or if no Class of Certificates has a Class Balance of at least 25% of its Original Class Balance, the most subordinate Class of Certificates outstanding other than the Class R-I, Class R-II or Class R-III Certificates). - 20 - "MONTHLY DISTRIBUTION STATEMENT": A monthly distribution statement prepared by the Trustee pursuant to Section 4.02(a) hereof. "MONTHLY PAYMENT": With respect to any Mortgage Loan and any Due Date, the scheduled monthly payment with respect to such Mortgage Loan, including any Escrow Payments but excluding any Balloon Payment, which is payable by a Mortgagor under the related Mortgage Note and applicable law and, with respect to a Balloon Mortgage Loan for which a Balloon Payment is due and has not been made, the Assumed Monthly Payment. "MORTGAGE": The mortgage, deed of trust or other instrument creating a first lien on or first priority ownership interest in a Mortgaged Property securing a Mortgage Note. "MORTGAGE INTEREST RATE": As to any Mortgage Loan, the per annum rate of interest at which interest accrues on the outstanding principal balance of such Mortgage Loan in accordance with the terms of the related Mortgage Note. "MORTGAGE LOAN": Each of the mortgage loans transferred and assigned to the Trustee pursuant to Section 2.01 and from time to time held in the Trust Fund, the mortgage loans originally so transferred, assigned and held being identified on the Mortgage Loan Schedule as of the Cut-off Date. Such term shall include any REO Mortgage Loan or Specially Serviced Mortgage Loan. "MORTGAGE LOAN FILE": With respect to any Mortgage Loan, the mortgage documents listed in Section 2.01(b) pertaining to such particular Mortgage Loan and any additional documents required to be added to such Mortgage Loan File pursuant to the express provisions of this Agreement. "MORTGAGE LOAN PURCHASE AGREEMENT": Each Mortgage Loan Purchase Agreement dated as of the Cut-off Date, by and between the Depositor and the applicable Seller, copies of which are attached hereto as EXHIBIT I. "MORTGAGE LOAN SCHEDULE": The list of Mortgage Loans included in the Trust Fund as of the Closing Date being attached hereto as EXHIBIT B, which list shall set forth with respect to each Mortgage Loan: (a) the Loan Number; (b) the property name, city and state where each related Mortgaged Property is located; (c) the Monthly Payment in effect as of the Cut-off Date; (d) the Mortgage Interest Rate, the Revised Rate, if any, and the Default Rate, if any; (e) the Maturity Date; (f) the Scheduled Principal Balance as of the Cut-off Date and, as applicable, the allocation of such balance to each related Mortgaged Property; - 21 - (g) the Originator of such Mortgage Loan; and (h) whether the Mortgage Loan is an Actual/360 Mortgage Loan or an actual/actual Mortgage Loan. The Mortgage Loan Schedule shall also set forth the total of the amounts described under clause (c) and (f) above for all of the Mortgage Loans. The Mortgage Loan Schedule may also set forth, for selected Mortgage Loans, the net operating income or debt service coverage ratio. The Mortgage Loan Schedule may be in the form of more than one list, collectively setting forth all of the information required. "MORTGAGE NOTE": With respect to any Mortgage Loan as of any date of determination, the note or other evidence of indebtedness and/or agreements evidencing the indebtedness of a Mortgagor under such Mortgage Loan, including any amendments or modifications, or any renewal or substitution notes, as of such date. "MORTGAGED PROPERTY": The underlying property securing a Mortgage Loan, including any REO Property, consisting of a fee simple estate, and, with respect to certain Mortgage Loans, a leasehold estate or both a leasehold estate and fee estate, or a leasehold estate in a portion of the property and a fee simple estate in the remainder, in a parcel of land improved by a commercial property, together with any personal property, fixtures, leases and other property or rights pertaining thereto. "MORTGAGOR": With respect to any Mortgage Loan, any obligor or obligors on any related Mortgage Note or Mortgage Notes. "MORTGAGOR ACCOUNT": As defined in Section 3.07(a). "MOST SUBORDINATE CLASS OF CERTIFICATES": At the time of determination, the Class of Certificates to which any Realized Losses would be first allocated as of such time in accordance with Section 4.07(a). "NET AGGREGATE PREPAYMENT INTEREST SHORTFALL": With respect to each Distribution Date, the excess, if any, of (a) the aggregate Prepayment Interest Shortfall for such Distribution Date over (b) the sum of (i) the aggregate Prepayment Interest Excess for such Distribution Date and (ii) the Servicer Prepayment Interest Shortfall for such Distribution Date. "NET INSURANCE PROCEEDS": Insurance Proceeds, to the extent such proceeds are not to be applied to the restoration of the related Mortgaged Property or released to the Mortgagor in accordance with the express requirements of the Mortgage or Mortgage Note or other documents included in the Mortgage Loan File or in accordance with prudent and customary servicing practices. "NET LIQUIDATION PROCEEDS": The Liquidation Proceeds received with respect to any Mortgage Loan net of the amount of (i) Liquidation Expenses incurred with respect thereto and, (ii) with respect to proceeds received in connection with the taking of a Mortgaged Property (or portion - 22 - thereof) by the power of eminent domain in condemnation, amounts required to be applied to the restoration or repair of the related Mortgaged Property. "NET REO PROCEEDS": With respect to each REO Property, REO Proceeds with respect to such REO Property net of any insurance premiums, taxes, assessments and other costs and expenses permitted to be paid therefrom pursuant to Section 3.17(b) of this Agreement. "NEW LEASE": Any lease of REO Property entered into on behalf of the Trust Fund, including any lease renewed or extended on behalf of the Trust Fund if the Trust Fund has the right to renegotiate the terms of such lease. "NONRECOVERABLE ADVANCE": Any Advance previously made or proposed to be made by the Master Servicer, the Trustee or the Fiscal Agent in respect of a Mortgage Loan which together with interest thereon, in the good faith judgment of the Master Servicer, the Trustee or the Fiscal Agent, will not, or, in the case of a proposed Advance, would not, be ultimately recoverable by the Master Servicer, the Trustee or the Fiscal Agent, as applicable, from net proceeds received solely with respect to such Mortgage Loan or the related Mortgaged Property, including related Insurance Proceeds, Liquidation Proceeds, REO Proceeds and escrowed amounts (net of any reasonable anticipated expenses payable therefrom). "NONRECOVERABLE ADVANCE CERTIFICATE": A certificate signed by a Servicing Officer or a Responsible Officer of the Trustee or the Fiscal Agent setting forth the determination of a Nonrecoverable Advance and the procedures and considerations of the Master Servicer, the Trustee or the Fiscal Agent forming the basis of such determination (including but not limited to information such as related income and expense statements, rent rolls, occupancy status, property inspections, and an Independent MAI appraisal of the related Mortgaged Property). "NON-U.S. PERSON": A person that is not a citizen or resident of the United States, a corporation, partnership, or other entity created or organized in or under the laws of the United States or any political subdivision thereof, an estate whose income is subject to United States federal income tax regardless of its source, or a trust if (A) for taxable years beginning after December 31, 1996 (or for taxable years ending after August 20, 1996, if the trustee has made an applicable election) a court within the United States is able to exercise primary supervision over the administration of such trust, and one or more United States fiduciaries have the authority to control 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. "NOTIONAL AMOUNT": With respect to any Distribution Date and the Class X Certificates, the aggregate of the Class Balances of the Certificates (other than the Class X Certificates and the Residual Certificates), as of the close of business on the preceding Distribution Date, and with respect to any Distribution Date and a Class X Component, the Class Balance of the Corresponding Certificate, as of the close of business on the preceding Distribution Date. "OFFERED CERTIFICATES": The Class A1, Class A2, Class A3, Class B, Class C, Class D, Class E and Class F Certificates. - 23 - "OFFICERS' CERTIFICATE": A certificate signed by the Chairman of the Board, the Vice Chairman of the Board, the President or a Vice President (however denominated) and by the Treasurer, the Secretary, one of the Assistant Treasurers or Assistant Secretaries, any other officer of the Master Servicer or the Special Servicer customarily performing functions similar to those performed by any of the above designated officers and also with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject, or an authorized officer of the Depositor, and delivered to the Depositor, the Trustee, the Special Servicer or the Master 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 Master Servicer, as the case may be, acceptable to the Trustee, except that any opinion of counsel relating to (a) qualification of REMIC I, REMIC II or REMIC III as a REMIC or the imposition of tax under the REMIC Provisions on any income or property of any REMIC, (b) compliance with the REMIC Provisions (including application of the definition of "INDEPENDENT CONTRACTOR") or (c) a resignation of the Master Servicer or the Special Servicer pursuant to Section 6.04, must be an opinion of counsel who is Independent of the Depositor, the Master Servicer, the Special Servicer and the Trustee. "ORIGINAL CLASS BALANCE": As to any Class of Certificates or Interests, the Original Class Balance set forth in the Preliminary Statement. "ORIGINAL PURCHASE AGREEMENT": With respect to any Mortgage Loan not originated by either Seller, the agreement between such Seller and the owner of such Mortgage Loan, pursuant to which such Seller acquired such Mortgage Loan. "ORIGINATOR": Any of (i) ___________________________; (ii) ______________________; (iii) _________________________________; (iv) ___________________________________; and (v) ___________________________________. "OWNERSHIP INTEREST": As to any Certificate, any ownership or security interest in such Certificate, including any interest in such Certificate as the Holder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner or as pledgee. "P&I ADVANCE": As to any Mortgage Loan, any advance made by the Master Servicer, the Trustee or the Fiscal Agent, pursuant to Section 4.06. Each reference to the payment or reimbursement of a P&I Advance shall be deemed to include, whether or not specifically referred to, payment or reimbursement of interest thereon at the Advance Rate from and including the date of the making of such P&I Advance through but excluding the date of payment or reimbursement. "PASS-THROUGH RATE": With respect to any Distribution Date and any Certificate, other than a Class X Certificate, a per annum rate equal to (a) as to the Class Al, Class A2 and Class A3 Certificates, the corresponding fixed Pass-Through Rate as set forth in the Preliminary Statement, (b) as to each of the Class B, Class C, Class D, Class E and Class F Certificates, the lesser of (i) the corresponding Pass-Through Rate as set forth in the Preliminary Statement and (ii) the Weighted Average Remittance Rate in effect from time to time on the Mortgage Loans and (c) as to the Class G, Class H, Class J, Class K and Class L Certificates, the corresponding fixed Pass-Through - 24 - Rate as set forth in the Preliminary Statement. The Residual Certificates will not have a Pass-Through Rate. The Pass-Through Rate for (i) each REMIC I Regular Interest shall equal the Remittance Rate on the related Mortgage Loan as of the Cut-off Date, and for (ii) each REMIC II Regular Interest shall equal the weighted average of the Pass-Through Rates of the REMIC I Regular Interests for such Distribution Date. "PAYING AGENT": _______________________, in its capacity as paying agent, or its successor in interest, or any successor trustee appointed as herein provided. "PERCENTAGE INTEREST": As to any Certificate of a Class, the percentage interest evidenced thereby in distributions required to be made with respect to such Class. With respect to any Certificate of a Class, the percentage interest is equal to the initial denomination of such Certificate as of the Closing Date, divided by the Original Class Balance of such Class. "PERMITTED INVESTMENTS": Any one or more of the following obligations or securities payable on demand or having a scheduled maturity on or before the Business Day preceding the date upon which such funds are required to be drawn and in no event having a maturity greater than 365 days, regardless of whether issued by the Depositor, the Master Servicer, the Trustee or any of their respective Affiliates and having at all times the required ratings, if any, provided for in this definition, unless each Rating Agency shall have confirmed in writing to the Master Servicer or the Special Servicer as applicable, that a lower rating would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates: (i) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America including, without limitation, obligations of: the U.S. Treasury (all direct or fully guaranteed obligations), the Farmers Home Administration (certificates of beneficial ownership), the General Services Administration (participation certificates), the U.S. Maritime Administration (guaranteed Title XI financing), the Small Business Administration (guaranteed participation certificates and guaranteed pool certificates), the U.S. Department of Housing and Urban Development (local authority bonds) and the Washington Metropolitan Area Transit Authority (guaranteed transit bonds); (ii) Federal Housing Administration debentures; (iii) obligations of the following United States government sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal National Mortgage Association (debt obligations), the Student Loan Marketing Association (debt obligations), the Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt obligations); (iv) federal funds, unsecured certificates of deposit, time or similar deposits, bankers' acceptances and repurchase agreements of any bank, the short term obligations of which are rated in the highest short term rating category by each of the Rating Agencies; - 25 - (v) demand and time deposits in, or certificates of deposit of, or bankers' acceptances issued by, any bank or trust company, savings and loan association or savings bank, the short term obligations of which are rated in the highest short term rating category by each of the Rating Agencies (or, if not rated by Fitch or S&P, otherwise acceptable to Fitch and S&P, as confirmed in writing by both of them that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates); (vi) debt obligations rated by each of the Rating Agencies (or, if not rated by Fitch or S&P, otherwise acceptable to Fitch and S&P, as confirmed in writing by both of them that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates) in its highest long-term unsecured rating category; (vii) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof), that is rated by each of the Rating Agencies (or, if not rated by Fitch or S&P, otherwise acceptable to Fitch or S&P, as confirmed in writing by both of them that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates) in its highest short-term unsecured debt rating category; (viii) the Federated Prime Obligation Money Market Fund, the Vulcan Money Market Fund or any other money market fund (the "FUND") so long as the Fund is rated "AAAm" by S&P and in its highest applicable rating category by Fitch (or, if not rated by Fitch or S&P, otherwise acceptable to Fitch or S&P, as confirmed in writing by both of them that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates); and (ix) any other demand, money market or time deposit, demand obligation or any other obligation, security or investment, PROVIDED that both Rating Agencies have confirmed in writing to the Master Servicer, Special Servicer or Trustee, as applicable, that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates; PROVIDED, HOWEVER, that (A) in the judgment of the Master Servicer or the Special Servicer, as applicable, 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 (B) no instrument or security shall be a Permitted Investment if (1) such instrument or security evidences a right to receive only interest payments, (2) the right to receive principal and interest payments derived from the underlying investment provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment, (3) its terms do not have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change, (4) to the extent rated, an "r" highlighter is affixed to its rating, (5) to the extent the related interest rate is variable, interest thereon is not tied to a single interest rate index plus a single fixed spread (if any), or does not move proportionately with that index, and (6) it is purchased for an amount in excess of its par value. - 26 - "PERMITTED TRANSFEREE": With respect to a Class R-I, Class R-II or Class R-III Certificate, and a transfer other than from the Initial Purchaser prior to the expiration of two years following the Closing Date, any Person or agent thereof that is a Qualified Institutional Buyer or an Affiliated Person and with respect to any such transfer at any time, who is not (a) a Disqualified Organization, (b) any other Person so designated by the Certificate Registrar based upon an Opinion of Counsel (provided at the expense of such Person or the Person requesting the Transfer) to the effect that the Transfer of an Ownership Interest in any Class R-I, Class R-II or Class R-III Certificate to such Person may cause REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC at any time that the Certificates are outstanding, (c) a Person that is a Disqualified Non-U.S. Person and (d) a Plan or any Person investing the assets of a Plan. "PERSON": Any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "PLAN": As defined in Section 5.02(c). "PREPAYMENT ASSUMPTION": The assumption that each Mortgage Loan with an Anticipated Repayment Date prepays on such date and that each other Mortgage Loan does not prepay prior to its respective Maturity Date. "PREPAYMENT INTEREST EXCESS": With respect to any Distribution Date, for each Mortgage Loan that was subject to a Principal Prepayment in full or in part during any Prepayment Period, which Principal Prepayment was applied to such Mortgage Loan after the Due Date in such Prepayment Period, the amount of interest that accrued at the Remittance Rate for such Mortgage Loan on the amount of such Principal Prepayment during the period commencing on the date after such Due Date and ending on the date as of which such Principal Prepayment was applied to the unpaid principal balance of the Mortgage Loan, inclusive, to the extent collected from the related Mortgagor. "PREPAYMENT INTEREST SHORTFALL": With respect to any Distribution Date, for each Mortgage Loan that was subject to a Principal Prepayment in full or in part during any Prepayment Period, which Principal Prepayment was applied to such Mortgage Loan prior to the Due Date in such Prepayment Period, the amount of interest, to the extent not collected from the related Mortgagor, that would have accrued at the Remittance Rate for such Mortgage Loan on the amount of such Principal Prepayment during the period commencing on the date as of which such Principal Prepayment was applied to the unpaid principal balance of the Mortgage Loan and ending on the day immediately preceding such Due Date, inclusive. "PREPAYMENT PERIOD": With respect to any Distribution Date, the period beginning the day after the Determination Date in the month immediately preceding the month in which such Distribution Date occurs (or the day after the Cut-off Date, in the case of the first Distribution Date) through and including the Determination Date immediately preceding such Distribution Date. - 27 - "PREPAYMENT PREMIUM": Any premium, penalty or fee paid or payable, as set forth in the related Mortgage Note, by a Mortgagor in connection with a Principal Prepayment, other than a Yield Maintenance Charge. "PRINCIPAL DISTRIBUTION AMOUNT": With respect to any Distribution Date, an amount equal to the aggregate of (a) all scheduled payments of principal (other than Balloon Payments) due on the Mortgage Loans on the related Due Date whether or not received and all scheduled Balloon Payments received, (b) if the scheduled Balloon Payment is not received with respect to any Balloon Mortgage Loan on and after the Maturity Date thereof, the Assumed Monthly Payment for such Mortgage Loan and (c) to the extent not previously advanced, any unscheduled principal recoveries received during the related Prepayment Period in respect of the Mortgage Loans, whether in the form of Principal Prepayments, Liquidation Proceeds, Insurance Proceeds or amounts received as a result of the purchase of any Mortgage Loan out of the Trust Fund. "PRINCIPAL PREPAYMENT": Any payment of principal made by the Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due Date and which is not accompanied by an amount of interest representing the full amount of scheduled interest due on any date or dates in any month or months subsequent to the month of prepayment. "PRINCIPAL RECOVERY FEE": With respect to any Specially Serviced Mortgage Loan (other than an extended Balloon Mortgage Loan) that is liquidated or restored to a performing status for at least three consecutive months, a fee for the benefit of the Special Servicer equal to: (i) in the case of a liquidated Mortgage Loan, the product of (a) the Principal Recovery Fee Rate times (b) the sum of the Net Liquidation Proceeds (other than Insurance Proceeds realized with respect to a Specially Serviced Mortgage Loan prior to foreclosure) and any past due interest actually collected, or (ii) in the case of a Mortgage Loan restored to a performing status as provided above, the product of (a) the Principal Recovery Fee Rate times (b) the sum of the principal component of each subsequent payment and any past due interest actually collected. "PRINCIPAL RECOVERY FEE RATE": A rate equal to (i) _____%, with respect to any Mortgage Loan with an outstanding principal balance of more than $_________ as of the date it becomes a Specially Serviced Mortgage Loan; (ii)_____%, with respect to any Mortgage Loan with an outstanding principal balance equal to or greater than $_________ but not greater than $_________ as of the date it becomes a Specially Serviced Mortgage Loan; and (iii)_____%, with respect to any such Mortgage Loan with an outstanding principal balance of less than $_________ as of the date it becomes a Specially Serviced Mortgage Loan. "PROPERTY ADVANCE": As to any Mortgage Loan, any advance made by the Master Servicer, the Trustee or the Fiscal Agent in respect of Property Protection Expenses or any expenses incurred to protect and preserve the security for a Mortgage Loan or taxes and assessments or insurance premiums, pursuant to Section 3.04 or Section 3.24, as applicable. Each reference to the payment or reimbursement of a Property Advance shall be deemed to include, whether or not specifically referred to, payment or reimbursement of interest thereon at the Advance Rate from and including the date of the making of such Advance through and including the date of payment or reimbursement. - 28 - "PROPERTY PROTECTION EXPENSES": Any costs and expenses incurred by the Master Servicer or the Special Servicer pursuant to Sections 3.04, 3.08, 3.10(b), 3.10(e), 3.10(f), 3.10(g), 3.10(h), 3.10(i), 3.10(k), 3.17(b) and 3.18 or indicated herein as being a cost or expense of the Trust Fund or REMIC I, REMIC II or REMIC III to be advanced by the Master Servicer. "QUALIFIED INSTITUTIONAL BUYER": A qualified institutional buyer within the meaning of Rule 144A. "QUALIFIED INSURER": As used in Section 3.08, (i) an insurance company or security or bonding company qualified to write the related insurance policy in the relevant jurisdiction which shall have a claims paying ability of "AA" or better by Fitch (or, if such company is not rated by Fitch, is rated at least A-IX by A.M. Best's Key Rating Guide) and "AA" or better by S&P (or, if such company is not rated by S&P, S&P has confirmed in writing that obtaining such insurance from an insurance company that is not rated by S&P or has a lower claims paying ability shall not result, in and of itself, in a downgrade, qualification or withdrawal of the then current ratings by S&P of any Class of Certificates), (ii) in the case of public liability insurance policies required to be maintained with respect to REO Properties in accordance with Section 3.08(a), shall have a claims paying ability of "A" or better by Fitch (or, if such company is not rated by Fitch, is rated at least A-IX by A.M. Best's Key Rating Guide) and S&P (or, if such company is not rated by S&P, S&P has confirmed in writing that obtaining such insurance from an insurance company that is not rated by S&P or has a lower claims paying ability shall not result, in and of itself, in a downgrade, qualification or withdrawal of the then current ratings by S&P of any Class of Certificates) and (iii) in the case of the fidelity bond and the errors and omissions insurance required to be maintained pursuant to Section 3.08(c), shall have a claims paying ability rated by each Rating Agency no lower than two ratings categories (without regard to pluses or minuses or numeric qualifications) lower than the highest rating of any outstanding Class of Certificates from time to time but in no event lower than "BBB" by Fitch and S&P (or if such company is not rated by S&P, S&P has confirmed in writing that obtaining such insurance from an insurance company that is not rated by S&P or has a lower claims paying ability shall not result, in and of itself, in a downgrade, qualification or withdrawal of the then current ratings by S&P of any Class of Certificates and, if such company is not rated by Fitch, is rated at least A-VIII by A.M. Best's Key Rating Guide), unless in any such case each of the Rating Agencies has confirmed in writing that obtaining the related insurance from an insurance company that is not rated by each of the Rating Agencies (subject to the foregoing exceptions) or that has a lower claims-paying ability than such requirements shall not result, in and of itself, in a downgrade, qualification or withdrawal of the then current ratings by such Rating Agency to any Class of Certificates. "QUALIFIED MORTGAGE": A Mortgage Loan that is a "qualified mortgage" within the meaning of Code Section 860G(a)(3) of the Code (but without regard to the rule in Treasury Regulations 1.860G-2(f)(2) that treats a defective obligation as a qualified mortgage, or any substantially similar successor provision). "RATED FINAL DISTRIBUTION DATE": ______________, which is the Distribution Date following the second anniversary after the date on which all the Mortgage Loans have zero balances, assuming no prepayments and that the Balloon Mortgage Loans fully amortize according to their amortization schedules and no Balloon Payment is made. - 29 - "RATING AGENCY": Each of Fitch and S&P. "REAL PROPERTY": Land or improvements thereon such as buildings or other inherently permanent structures thereon (including items that are structural components of the buildings or structures), in each such case as such terms are used in the REMIC Provisions. "REALIZED LOSS": With respect to each Loss Mortgage Loan (or REO Property) as to which a Liquidation Event has occurred, an amount (not less than zero) equal to (i) the Scheduled Principal Balance of the Mortgage Loan (or REO Property) as of the date of the Liquidation Event, plus (ii) interest at the Remittance Rate from the Due Date as to which interest was last paid or advanced to Certificateholders up to the last day of the month in which such Liquidation Event occurred on the Scheduled Principal Balance of such Mortgage Loan (or REO Property) outstanding during each Collection Period that such interest was not paid or advanced, plus (iii) any unreimbursed Advances made by the Master Servicer, the Trustee or the Fiscal Agent and interest accrued and payable thereon, minus (iv) the proceeds, if any, received during the month in which such Liquidation Event occurred, to the extent applied as recoveries of interest at the Remittance Rate and to principal of the Mortgage Loan. With respect to each Loss Mortgage Loan with respect to which an Advance previously made or proposed to be made has been determined by the Master Servicer, the Trustee or the Fiscal Agent to be a Nonrecoverable Advance an amount (not less than zero) equal to (i) the Scheduled Principal Balance of the Mortgage Loan (or REO Mortgage Loan) as of the date of such determination, plus (ii) interest at the Remittance Rate from the Due Date as to which interest was last paid or advanced to Certificateholders up to the last day of the month in which such determination was made on the Scheduled Principal Balance of such Mortgage Loan (or REO Mortgage Loan) outstanding during each Collection Period that such interest was not paid or advanced, plus (iii) any unreimbursed Advances and interest accrued and payable thereon, minus (iv) the proceeds, if any, received during the month in which such determination was made, to the extent applied as recoveries of interest at the Remittance Rate and to principal of the Mortgage Loan. With respect to each Mortgage Loan which has become the subject of a Deficient Valuation or a modification pursuant to which a portion of the principal balance thereof has been permanently forgiven, the difference between the principal balance of the Mortgage Loan outstanding immediately prior to such Deficient Valuation or modification and the principal balance of the Mortgage Loan as reduced by the Deficient Valuation or modification. "REASSIGNMENT OF ASSIGNMENT OF LEASES AND RENTS": As defined in Section 2.01(b)(v). "RECORD DATE": With respect to each Distribution Date, the last Business Day of the month immediately preceding the month in which such Distribution Date occurs; PROVIDED, HOWEVER, that with respect to the first Distribution Date, the Record Date shall be the Closing Date. "REGULAR SERVICING PERIOD": Any Interest Accrual Period other than a Special Servicing Period. "REGULATION D": Regulation D under the Act. "REMIC": A "real estate mortgage investment conduit" within the meaning of Section 860D of the Code. - 30 - "REMIC I": A segregated asset pool within the Trust Fund consisting of the Mortgage Loans (exclusive of Default Interest), collections thereon, any REO Property acquired in respect thereof and amounts held from time to time in the Collection Account and the Certificate Account. "REMIC I INTERESTS": Collectively, the REMIC I Regular Interests and the Class R-I Certificates. "REMIC I REGULAR INTERESTS": Collectively, the uncertificated interests designated as "regular interests" in REMIC I, which shall consist of, with respect to each Mortgage Loan, an interest having an Original Class Balance equal to the Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date, and which has a Pass-Through Rate equal to the Remittance Rate of such Mortgage Loan as of the Cut-off Date. "REMIC II": A segregated asset pool within the Trust Fund consisting of the REMIC I Regular Interests. "REMIC II INTERESTS": Collectively, the REMIC II Regular Interests and the Class R-II Certificates. "REMIC II REGULAR INTEREST A-1": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class A1 Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST A-2": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class A2 Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST A-3": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class A3 Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST B": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class B Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST C": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class C Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST D": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class - 31 - Balance of the Class D Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST E": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class E Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST F": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class F Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST G": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class G Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST H": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class H Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST J": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class J Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST K": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class K Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTEREST L": The uncertificated interest designated as a "regular interest" in REMIC II, which shall consist of an interest having a Class Balance equal to the aggregate Class Balance of the Class L Certificates, and which has a Pass-Through Rate equal to the weighted average of the Pass-Through Rates of the REMIC I Regular Interests. "REMIC II REGULAR INTERESTS": Collectively, the REMIC II Regular Interest A-1, REMIC II Regular Interest A-2, REMIC II Regular Interest A-3, REMIC II Regular Interest B, REMIC II Regular Interest C, REMIC II Regular Interest D, REMIC II Regular Interest E, REMIC II Regular Interest F, REMIC II Regular Interest G, REMIC II Regular Interest H, REMIC II Regular Interest J, REMIC II Regular Interest K and REMIC II Regular Interest L. "REMIC III": A segregated asset pool within the Trust Fund consisting of the REMIC II Regular Interests. - 32 - "REMIC III CERTIFICATES": The Certificates, other than the Class R-I Certificates and the Class R-II Certificates. "REMIC PROVISIONS": Provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at Section 860A through 860G of Subchapter M of Chapter 1 of the Code, and related provisions, and regulations (including any applicable proposed regulations) and rulings promulgated thereunder, as the foregoing may be in effect from time to time. "REMITTANCE DATE": With respect to any Distribution Date, the Business Day preceding such Distribution Date. "REMITTANCE RATE": With respect to any Mortgage Loan, the per annum rate equal to the excess of the related Mortgage Interest Rate (without giving effect to any modification or other reduction thereof following the Cut-off Date) over the sum of the related Servicing Fee Rate and the Trustee Fee Rate. For this purpose, if the related Mortgage Interest Rate is calculated other than on the basis of a 360-day year consisting of twelve 30-day months (a "30/360 BASIS"), such Mortgage Interest Rate will be recalculated on a 30/360 basis. "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 or profits derived by any Person from such property (unless such amount is a fixed percentage or percentages of receipts or sales and otherwise constitutes Rents from Real Property); (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. - 33 - "REO ACCOUNT": As defined in Section 3.17(b). "REO MORTGAGE LOAN": Any Mortgage Loan as to which the related Mortgaged Property has become an REO Property. "REO PROCEEDS": With respect to any REO Property and the related REO Mortgage Loan, all revenues received by the Special Servicer with respect to such REO Property or REO Mortgage Loan which do not constitute Liquidation Proceeds. "REO PROPERTY": A Mortgaged Property title to which has been acquired by the Special Servicer on behalf of the Trust Fund through foreclosure, deed in lieu of foreclosure or otherwise. "REPURCHASE PRICE": With respect to any Mortgage Loan to be repurchased pursuant to Section 2.03(b) or purchased pursuant to Section 9.01, or any Specially Serviced Mortgage Loan or any REO Mortgage Loan to be sold or repurchased pursuant to Section 3.18, an amount, calculated by the Master Servicer, equal to: (i) the unpaid principal balance of such Mortgage Loan as of the Due Date as to which a payment was last made by the Mortgagor (less any Advances previously made on account of principal); PLUS (ii) unpaid accrued interest from the Due Date as to which interest was last paid by the Mortgagor up to the Due Date in the month following the month in which the purchase or repurchase occurred at a rate equal to the Mortgage Interest Rate on the unpaid principal balance of such Mortgage Loan (less any Advances previously made on account of interest); PLUS (iii) any unreimbursed Advances and unpaid Servicing Fees, Trustee Fees and Special Servicing Compensation allocable to such Mortgage Loan together with interest thereon at the Advance Rate; PLUS (iv) in the event that the Mortgage Loan is required to be repurchased pursuant to Section 2.03(b), expenses reasonably incurred or to be incurred by the Master Servicer, the Special Servicer or the Trustee in respect of the Breach or Defect giving rise to the repurchase obligation, including any expenses arising out of the enforcement of the repurchase obligation. "REQUEST FOR RELEASE": A request for a release signed by a Servicing Officer, substantially in the form of EXHIBIT G hereto. "RESERVE ACCOUNTS": With respect to any Mortgage Loan, reserve accounts, if any, established pursuant to the Mortgage or the Loan Agreement and any Escrow Account. Any Reserve Account may be a sub-account of a related Cash Collateral Account. Any Reserve Account shall be beneficially owned for federal income tax purposes by the Person who is entitled to receive the reinvestment income or gain thereon in accordance with the terms and provisions of the related Mortgage Loan and Section 3.07, which Person shall be taxed on all reinvestment income or gain - 34 - thereon. The Master Servicer shall be permitted to make withdrawals therefrom for deposit into the related Cash Collateral Account, if applicable, or the Collection Account or for the purposes set forth under the related Mortgage Loan. "RESIDUAL CERTIFICATE": Any of the Class R-I, Class R-II or Class R-III Certificates. "RESPONSIBLE OFFICER": Any officer of the Asset Backed Securities Trust Services Group of the Trustee or the Fiscal Agent (and, in the event that the Trustee is the Certificate Registrar or the Paying Agent, of the Certificate Registrar or the Paying Agent, as applicable) with direct responsibility for the administration of this Agreement and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's knowledge of and familiarity with the particular subject, and, in the case of any certification required to be signed by a Responsible Officer, such an officer whose name and specimen signature appears on a list of corporate trust officers furnished to the Master Servicer and the Special Servicer by the Trustee and the Fiscal Agent, as such list may from time to time be amended. "REVISED RATE": With respect to the Mortgage Loans, the increased interest rate after the Anticipated Repayment Date (in the absence of a default) for each applicable Mortgage Loan, as calculated and as set forth in the related Mortgage Loan. "RULE 144A": Rule 144A under the Act. "S&P": Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. "SCHEDULED PRINCIPAL BALANCE": With respect to any Mortgage Loan, at any date of determination, an amount equal to (a) the principal balance as of the Cut-off Date of such Mortgage Loan, minus (b) the sum of (i) the principal portion of each Monthly Payment due on such Mortgage Loan after the Cut-off Date up to such date of determination, to the extent received from the Mortgagor or advanced and distributed to Certificateholders, and (ii) all voluntary and involuntary Principal Prepayments and other unscheduled collections of principal received with respect to such Mortgage Loan up to such date of determination, to the extent distributed to Certificateholders. The Scheduled Principal Balance of a Mortgage Loan with respect to which title to the related Mortgaged Property has been acquired is equal to the principal balance thereof outstanding on the date on which such title is acquired less any Net REO Proceeds allocated to principal on such Mortgage Loan. The Scheduled Principal Balance of a Specially Serviced Mortgage Loan with respect to which the Master Servicer or Special Servicer has made a Final Recovery Determination is zero. "SECURITIES LEGEND": With respect to any Class X, Class G, Class H, Class J, Class K, Class L, Class R-I, Class R-II and Class R-III Certificate, a legend substantially in the form set forth in EXHIBIT H hereto. "SECURITY AGREEMENT": With respect to any Mortgage Loan, any security agreement or equivalent instrument, whether contained in the related Mortgage or executed separately, creating in favor of the holder of such Mortgage a security interest in the personal property constituting security repayment of such Mortgage Loan. - 35 - "SELLER": Each of (i)_____________________________, a ____________________, and its successors in interest, and (ii)___________________________, a ____________________, and its successors in interest. "SERVICER": Each of the Master Servicer and the Special Servicer. "SERVICER PREPAYMENT INTEREST SHORTFALL": With respect to any Prepayment Interest Shortfall occurring on any Distribution Date, the amount equal to the lesser of (i) the product of (A) the aggregate outstanding principal balance of the Mortgage Loans immediately prior to the Due Date preceding such Distribution Date TIMES (B) ____%, divided by 12, or (ii) the excess of all Prepayment Interest Shortfalls over all Prepayment Interest Excesses for such Distribution Date, PROVIDED, that, if the result of the foregoing is less than zero then the amount of the Servicer Prepayment Interest Shortfall for such Distribution Date shall be zero. "SERVICER REMITTANCE REPORT": A report prepared by the Master Servicer and/or the Special Servicer in such media as may be agreed upon by the Master Servicer, the Special Servicer and the Trustee containing such information regarding the Mortgage Loans as will permit the Trustee to calculate the amounts to be distributed pursuant to Section 4.01 and to furnish statements to Certificateholders pursuant to Section 4.02, including information on the outstanding principal balances of each Mortgage Loan specified therein, and containing such additional information as the Master Servicer, the Special Servicer and the Trustee may from time to time agree, a form of which is attached hereto as EXHIBIT N. "SERVICING COMPENSATION": With respect to any Distribution Date, the related Servicing Fee and any other fees, charges or other amounts payable to the Master Servicer on such Distribution Date. "SERVICING FEE": With respect to each Mortgage Loan for any Distribution Date, an amount per Interest Accrual Period equal to the product of (i) one-twelfth of the Servicing Fee Rate and (ii) the Scheduled Principal Balance of such Mortgage Loan as of the Due Date (after giving effect to all payments of principal on such Mortgage Loan on such Due Date) in the month preceding the month in which such Distribution Date occurs. "SERVICING FEE RATE": The servicing fee rate with respect to each Mortgage Loan as set forth on SCHEDULE B hereof. "SERVICING OFFICER": Any officer or employee of the Master Servicer or the Special Servicer, as applicable, involved in, or responsible for, the administration and servicing of the Mortgage Loans or this Agreement and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer's or employee's knowledge of and familiarity with the particular subject, and, in the case of any certification required to be signed by a Servicing Officer, such an officer or employee whose name and specimen signature appears on a list of servicing officers furnished to the Trustee by the Master Servicer or the Special Servicer, as applicable, as such list may from time to time be amended. - 36 - "SERVICING STANDARD":The procedures that the Master Servicer follows in the servicing and administration of Mortgage Loans, consistent with the higher of (i) the standard of care, skill, prudence and diligence with which the Master Servicer services and administers mortgage loans that are held for other portfolios and are similar to the Mortgage Loans and (ii) the standard of care, skill, prudence and diligence which the Master Servicer services and administers mortgage loans that are held for its own portfolio and are similar to the Mortgage Loans, in either case, giving due consideration to customary and usual standards of practice of prudent institutional multifamily and commercial mortgage lenders, loan servicers and asset managers but without regard to: (a) any relationship that the Master Servicer, or any Affiliate of the Master Servicer, may have with any Mortgagor or any Affiliate of any Mortgagor, the Depositor, any party to any particular transaction or any of their respective Affiliates; (b) the Master Servicer's obligations to make Advances with respect to the Mortgage Loans; (c) the Master Servicer's right to receive compensation for its services hereunder or with respect to any particular transaction and the adequacy of such compensation; (d) the ownership, servicing or management for others by the Master Servicer of any other mortgage loans or property; or (e) the ownership by the Master Servicer of any Certificates or other securities. To the extent consistent with the foregoing and subject to the express limitations set forth in this Agreement, the procedures followed by the Master Servicer shall seek to maximize the timely and complete recovery of principal and interest on the Mortgage Loans. "SERVICING TRANSFER DATE": The date after the occurrence of a Servicing Transfer Event on which the Special Servicer receives the information, documents and records required to be delivered thereto pursuant to Section 3.26(a). "SERVICING TRANSFER EVENT": The occurrence of any of the following with respect to a Mortgage Loan: (i) such Mortgage Loan becomes a Defaulted Mortgage Loan; (ii) the related Mortgagor has entered into or consented to bankruptcy, appointment of a receiver or conservator or a similar insolvency or similar proceeding, or the Mortgagor has become the subject of a decree or order for such proceeding which shall have remained in force undischarged or unstayed for a period of 60 days; (iii) the Master Servicer shall have received notice of the foreclosure or proposed foreclosure of any other lien on the Mortgaged Property; (iv) in the judgment of the Master Servicer, a payment default has occurred and is not likely to be cured by the related Mortgagor within 60 days; (v) the related Mortgagor admits in writing its inability to pay its debts generally as they become due, files a petition to take advantage of any applicable insolvency or reorganization statute, makes an assignment for the benefit of its creditors, or voluntarily suspends payment of its obligations; (vi) any other material default has, in the Master Servicer's judgment occurred which is not reasonably susceptible of cure within the time periods and on the terms and conditions, if any, provided in the related Mortgage; (vii) the related Mortgaged Property becomes REO Property; (viii) if for any - 37 - reason, the Master Servicer cannot enter into an assumption agreement upon the transfer by the related Mortgagor of the Mortgage; or (ix) an event has occurred which has materially and adversely affected the value of the related Mortgaged Property in the reasonable judgment of the Master Servicer. "SPECIAL EVENT REPORT": As defined in Section 3.22(b) hereof. "SPECIAL SERVICER": _____________________, a ___________________________, or any successor Special Servicer appointed as provided in Section 3.25. "SPECIAL SERVICER EVENT OF DEFAULT": As defined in Section 7.01(b). "SPECIAL SERVICING COMPENSATION": With respect to any Mortgage Loan, any of the Special Servicing Fee and Principal Recovery Fee and other amounts described in Section 3.12(b) which shall be due to the Special Servicer. "SPECIAL SERVICING FEE": With respect to each Specially Serviced Mortgage Loan and any Distribution Date, an amount per Special Servicing Period equal to the product of (i) one-twelfth of the Special Servicing Fee Rate and (ii) the outstanding principal balance of such Specially Serviced Mortgage Loan as of the Due Date (after giving effect to all payments of principal on such Specially Serviced Mortgage Loan on such Due Date) in the month preceding the month in which such Distribution Date occurs, payable solely from amounts received in respect of such Specially Serviced Mortgage Loan, or following a liquidation in which Net Liquidation Proceeds are insufficient to pay accrued Special Servicing Fees, from funds on deposit in the Collection Account. "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. "SPECIAL SERVICING STANDARD": The procedures that the Special Servicer follows in the servicing, administration and disposition of Specially Serviced Mortgage Loans and related real property, consistent with the higher of (i) the standard of care, skill, prudence and diligence with which the Special Servicer services, administers and disposes of, other mortgage loans (which meet the criteria for Specially Serviced Mortgage Loans) and related property that are held for other portfolios and are similar to the Mortgage Loans, Mortgaged Property and REO Property and (ii) the standard of care, skill, prudence and diligence with which the Special Servicer services, administers and disposes of, other mortgage loans (which meet the criteria for Specially Serviced Mortgage Loans) and related property that are held for its own portfolio and are similar to the Mortgage Loans, Mortgaged Property and REO Property, giving due consideration to customary and usual standards of practice of prudent institutional multifamily and commercial mortgage lenders, loan servicers and asset managers, as to maximize the net present value of recoveries on the Mortgage Loans, but without regard to: - 38 - (a) any relationship that the Special Servicer or any Affiliate of the Special Servicer may have with any Mortgagor or any Affiliate of any Mortgagor, the Depositor, any party to any particular transaction or any of their respective Affiliates; (b) the Special Servicer's right to receive compensation for its services hereunder or with respect to any particular transaction and the adequacy of such compensation; (c) the ownership, servicing or management for others by the Special Servicer of any other mortgage loans or property; or (d) the ownership by the Special Servicer of any Certificates or other securities. "SPECIALLY SERVICED MORTGAGE LOAN": Any Mortgage Loan with respect to which a Servicing Transfer Date has occurred and which has not ceased to be a Specially Serviced Mortgage Loan pursuant to Section 3.26(a). "SPREAD RATE": The Spread Rate (per annum) for the following Classes of Certificates is as set forth below: CLASS SPREAD RATE - ----- ----------- A1 ___% A2 ___% A3 ___% B ___% C ___% D ___% E ___% F ___% "STARTUP DAY": The day designated as such pursuant to Section 2.06(a) hereof. "SUMMARY REPORT": A quarterly report or annual summary of quarterly reports setting forth the information with respect to the Mortgagors and Mortgaged Properties, substantially in the form of EXHIBIT J hereto. "TAX RETURNS": The federal income tax return on IRS Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be filed on behalf of each of REMIC I, REMIC II or REMIC III 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. - 39 - "TERMINATED PARTY": As defined in Section 7.01(c). "TERMINATING PARTY": As defined in Section 7.01(c). "TERMINATION DATE": The Distribution Date on which the Trust Fund is terminated pursuant to Section 9.01. "TRANSFER": Any direct or indirect transfer or other form of assignment of any Ownership Interest in a Class R-I, Class R-II or Class R-III Certificate. "TRUST FUND": The corpus of the trust created hereby and to be administered hereunder, consisting of: (i) such Mortgage Loans as from time to time are subject to this Agreement, together with the Mortgage Loan Files relating thereto, (ii) all scheduled or unscheduled payments on or collections in respect of the Mortgage Loans due after the Cut-off Date; (iii) any REO Property; (iv) all revenues received in respect of any REO Property; (v) the Master Servicer's, the Special Servicer's and the Trustee's rights under the insurance policies with respect to the Mortgage Loans required to be maintained pursuant to this Agreement and any proceeds thereof; (vi) any Assignments of Leases and Rents and any Security Agreements; (vii) any indemnities or guaranties given as additional security for any Mortgage Loans; (viii) all assets deposited in the Lock-Box Accounts, Cash Collateral Accounts, Escrow Accounts and Reserve Accounts (to the extent such assets in such accounts are not assets of the respective Mortgagors), the Collection Account and the Certificate Account including reinvestment income; (ix) any environmental indemnity agreements relating to the Mortgaged Properties; (x) the rights and remedies under the Mortgage Loan Purchase Agreements and Original Purchase Agreements; and (xi) the proceeds of any of the foregoing (other than any interest earned on deposits in the Lock-Box Accounts, Cash Collateral Accounts, Escrow Accounts and any Reserve Accounts, to the extent such interest belongs to the related Mortgagor). "TRUSTEE": ____________________________, in its capacity as trustee, or its successor in interest, or any successor trustee appointed as herein provided. "TRUSTEE EXCEPTION REPORT": As defined in Section 2.02(e). "TRUSTEE FEE": With respect to each Mortgage Loan and for any Distribution Date, an amount per Interest Accrual Period equal to the product of (i) one-twelfth of the Trustee Fee Rate multiplied by (ii) the Scheduled Principal Balance of such Mortgage Loan as of the Due Date (after giving effect to all payments of principal on such Mortgage Loan on such Due Date) in the month preceding the month in which such Distribution Date occurs. "TRUSTEE FEE RATE": A rate equal to ____% per annum. "UNDERWRITER": ________________________, "UNSCHEDULED PAYMENTS": With respect to a Mortgage Loan and a Prepayment Period, all Net Liquidation Proceeds and Net Insurance Proceeds payable under such Mortgage Loan, the Repurchase Price of any Mortgage Loan that is repurchased or purchased pursuant to Section 2.03(b) or Section 9.01, and any other payments under or with respect to such Mortgage Loan not scheduled - 40 - to be made, including Principal Prepayments received by the Master Servicer, but excluding Prepayment Premiums, during such Prepayment Period. "UPDATED APPRAISAL": An appraisal of a Mortgaged Property or REO Property, as the case may be, conducted subsequent to any appraisal performed on or prior to the Cut-off Date in accordance with MAI standards, the costs of which shall be paid as a Property Advance by the Master Servicer, and which shall be conducted by an MAI appraiser with at least five years of experience appraising similar properties in the area where the Mortgaged Property is located selected by the Special Servicer. "VOTING RIGHTS": The portion of the voting rights of all of the Certificates which is allocated to any Certificate. At all times during the term of this Agreement, all the Voting Rights shall be allocated among the Class Al, Class A2, Class A3, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K and Class L Certificates in proportion to the respective Class Balances, except that for purposes of determining Voting Rights, allocation of Collateral Value Adjustment shall be deemed to reduce the Class Balance of the affected Class. Neither the Holders of the Class X Certificates nor the Holders of the Residual Certificates will have Voting Rights. Voting Rights allocated to a Class of Certificateholders shall be allocated among such Certificateholders in proportion to the Percentage Interests evidenced by their respective Certificates. In addition, allocation of Realized Losses to a Class of Certificates and any other event which changes such Class Balance will also result in a corresponding change to such Class' Voting Rights. "WEIGHTED AVERAGE REMITTANCE RATE": With respect to any Distribution Date, a per annum rate equal to a fraction (expressed as a percentage) the numerator of which is the sum of the products of (i) the Remittance Rate for each Mortgage Loan as of the Due Date occurring in the month immediately preceding the month in which such Distribution Date occurs, and (ii) the Scheduled Principal Balance of the related Mortgage Loan as of such Due Date, after giving effect to all payments of principal due on such Mortgage Loan on such Due Date, and the denominator of which is the sum of the Scheduled Principal Balances of each Mortgage Loan as of the Due Date occurring in the month preceding the month in which such Distribution Date occurs (after giving effect to all payments of principal due on such Mortgage Loan on such Due Date). "YIELD MAINTENANCE CHARGE": With respect to any Mortgage Loan, the yield maintenance charge, if any, payable under the related Mortgage Note in connection with certain prepayments. SECTION 1.02 CERTAIN CALCULATIONS. Unless otherwise specified herein, the following provisions shall apply: (a) All calculations of interest with respect to the Mortgage Loans (other than the Actual/360 Mortgage Loans) and of Advances provided for herein shall be made on the basis of a 360-day year consisting of twelve 30-day months. All calculations of interest with respect to the Actual/360 Mortgage Loans and of Advances provided for herein shall be made as set forth in such Mortgage Loans with respect to the calculation of the related Mortgage Interest Rate, except that for purposes of determining the Remittance Rate, the Mortgage Interest Rate of each Actual/360 - 41 - Mortgage Loan and each Mortgage Loan accruing interest on an actual/actual basis will be adjusted to an equivalent rate on the basis of a 360-day year consisting of twelve 30-day months. (b) Any Mortgage Loan payment is deemed to be received on the date such payment is actually received by the Master Servicer, Special Servicer or the Trustee; PROVIDED, HOWEVER, that for purposes of calculating distributions on the Certificates, Principal Prepayments with respect to any Mortgage Loan are deemed to be received on the date they are applied in accordance with Section 3.01(b) to reduce the outstanding principal balance of such Mortgage Loan on which interest accrues. (c) Any amounts received in respect of a Mortgage Loan as to which a default has occurred and is continuing in excess of Monthly Payments shall be applied to Default Interest and other amounts due on such Mortgage Loan prior to the application to late fees. SECTION 1.03 CERTAIN CONSTRUCTIONS. For purposes of Section 9.01, references to the Most Subordinate Class of Certificates as defined in Section 1.01 (or REMIC II Regular Interests) outstanding at any time shall mean the most or next most subordinate Class of Certificates (or REMIC II Regular Interests) then outstanding as among the Class A1, Class A2, Class A3, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K and Class L Certificates (and the Classes of Corresponding REMIC II Regular Interests). For such purposes, the Class A1, Class A2 and Class A3 Certificates (and the Classes of Corresponding REMIC II Regular Interests) together shall be considered to be one Class. For purposes of this Agreement (except as specifically provided in the definition of "Certificateholder"), each Class of Certificates shall be deemed to be outstanding only to the extent its respective Class Balance has not been reduced to zero. For purposes of this Agreement, the Class X Certificates shall be deemed to be outstanding until their Notional Amount has been reduced to zero. ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES SECTION 2.01 CONVEYANCE OF MORTGAGE LOANS. (a) The Depositor, concurrently with the execution and delivery hereof, does hereby assign to the Trustee, without recourse, for the benefit of the Certificateholders all the right, title and interest of the Depositor, including any security interest therein for the benefit of the Depositor, in, to and under (i) the Mortgage Loans identified on the Mortgage Loan Schedule, (ii) the Mortgage Loan Purchase Agreements, (iii) each Original Purchase Agreement as assignee of the Seller's rights thereunder to the extent related to any Mortgage Loan, and (iv) all Reserve Accounts, Lock-Box Accounts, Cash Collateral Accounts and all other assets included or to be included in the Trust Fund. Such assignment includes all interest and principal received or receivable on or with respect to the Mortgage Loans after the Cut-off Date but does not include principal and interest due, and Principal Prepayments received, on or before the Cut-off Date. The transfer of the Mortgage Loans and the - 42 - related rights and property accomplished hereby is absolute and is intended by the parties to constitute a sale. The Depositor shall cause the Reserve Accounts, Cash Collateral Accounts and Lock-Box Accounts to be transferred to and held in Eligible Accounts (subject to Section 3.04(b)) in the name of the Master Servicer on behalf of the Trustee as successor to the Seller and the Originators. (b) In connection with the Depositor's assignment pursuant to subsection (a) above, the Depositor shall direct, and hereby represents and warrants that it has directed, the Sellers pursuant to each Mortgage Loan Purchase Agreement to deliver to and deposit with, or cause to be delivered to and deposited with, the Trustee or a Custodian appointed thereby, on or before the Closing Date (except as expressly provided in this Section 2.01(b)), the following documents or instruments with respect to each Mortgage Loan so assigned: (i) the original of the Mortgage Note, endorsed without recourse to the order of the Trustee in the following form: "Pay to the order of ___________________, as Custodian or Trustee, without recourse" which Mortgage Note and all endorsements thereon shall show a complete chain of endorsement from the originator to the Trustee; (ii) the original Mortgage and any intervening assignments (or certified copies of such assignments) thereof, in each case with evidence of recording thereon, or, if any such original Mortgage has not been returned from the applicable public recording office, a copy thereof certified to be a true and complete copy of the original thereof submitted for recording; (iii) an Assignment of Mortgage, executed by the appropriate Seller, in blank or to the order of the Trustee, in suitable form for recordation in the jurisdiction in which the Mortgaged Property is located in the following form: "___________________, as Custodian or Trustee", PROVIDED, that any Assignment of Mortgage to the Trustee not executed and submitted for recording prior to the Closing Date shall be in the form attached as an exhibit to the Mortgage Loan Purchase Agreements; (iv) originals or certified copies of any related Assignment of Leases and Rents and any related Security Agreement (if, in either case, such item is a document separate from the Mortgage), any intervening assignments of each such document or instrument; (v) assignments of any related Assignment of Leases and Rents (a "REASSIGNMENT OF ASSIGNMENT OF LEASES AND RENTS") and any related Security Agreement (if, in either case, such item is a document separate from the Mortgage), executed by the appropriate Seller or the prior holder of record in blank or to the order of the Trustee, with the assignment to the Trustee in the following form: "_____________________, as Custodian or Trustee"; (vi) originals or certified copies of all assumption, modification and substitution agreements in those instances where the terms or provisions of the Mortgage or Mortgage Note have been modified or the Mortgage or Mortgage Note has been assumed; - 43 - (vii) the original lender's title insurance policies with respect to each Mortgage (or, prior to receipt by the Seller of such original lender's title insurance policies, all commitments, binders or policy mark-ups with respect thereto), together with an endorsement assigning such policy to the Custodian or Trustee (unless such policy states that it runs to the benefit of any assignee of the Mortgage); (viii) all UCC Financing Statements, assignments and continuation statements or copies thereof sufficient to perfect (and maintain the perfection of) the security interest held by the originator of the Mortgage Loan (and each assignee prior to the Trustee) in and to the personalty of the Mortgagor at the Mortgaged Property (in each case with evidence of filing thereon), and to transfer such security interest to the Trustee; (ix) a copy of the hazard insurance policy, any flood insurance policies, and any other insurance policies required under the Mortgage; (x) the original appraisal report; (xi) any Phase I environmental reports; (xii) originals or copies of any guaranties related to such Mortgage Loan; and (xiii) a copy of any ground lease relating to the Mortgaged Property. To the extent not previously delivered to the Trustee or the Custodian, within 45 days of the Closing Date the Depositor shall deliver or cause to be delivered to, and deposit with the Trustee or the Custodian (on behalf of the Trustee), with copies to the Master Servicer and the Special Servicer, the following documents or instruments with respect to each Mortgage Loan assigned hereunder: (xiv) originals or certified copies of any environmental liabilities agreement; (xv) originals or copies of any escrow agreements; (xvi) originals or certified copies of any lease subordination agreements and tenant estoppels; (xvii) any opinions of borrower's counsel; and (xviii) originals or certified copies of any collateral assignments of property management agreements and other servicing agreements. If a Seller cannot deliver, or cause to be delivered as to any Mortgage Loan, the original Mortgage Note, such Seller shall deliver a copy or duplicate original of such Mortgage Note, together with an affidavit in a form reasonably acceptable to the Trustee, certifying that the original thereof has been lost or destroyed. If a Seller cannot deliver, or cause to be delivered, as to any Mortgage Loan, any of the documents and/or instruments referred to in clauses (ii), (iii), (iv), (v) and (viii) of this Section 2.01(b), with evidence of recording thereon, solely because of a delay caused - 44 - by the public recording office where such document or instrument has been delivered for recordation, the delivery requirements of the related Mortgage Loan Purchase Agreement and this Section 2.01(b) shall be deemed to have been satisfied and such non-delivered document or instrument shall be deemed to have been included in the Mortgage Loan File, provided that a photocopy of such non-delivered document or instrument (certified by such Seller to be a true and complete copy of the original thereof submitted for recording) is delivered to the Trustee or a Custodian on or before the Closing Date, and either the original of such non-delivered document or instrument, or a photocopy thereof (certified by the appropriate county recorder's office to be a true and complete copy of the original thereof submitted for recording), with evidence of recording thereon, is delivered to the Trustee or a Custodian within 120 days of the Closing Date (or within such longer period after the Closing Date as the Trustee may consent to, which consent shall not be unreasonably withheld so long as such Seller is, as certified in writing to the Trustee no less often than monthly, in good faith attempting to obtain from the appropriate county recorder's office or other filing office such original or photocopy). If a Seller cannot deliver, or cause to be delivered, as to any Mortgage Loan, any of the documents and/or instruments referred to in clauses (ii), (iii), (iv), (v) and (viii) of this Section 2.01(b), with evidence of recording thereon, for any other reason, including, without limitation, that such non-delivered document or instrument has been lost, the delivery requirements of the related Mortgage Loan Purchase Agreement and this Section 2.01(b) shall be deemed to have been satisfied and such non-delivered document or instrument shall be deemed to have been included in the Mortgage Loan File, provided that a photocopy of such non-delivered document or instrument (with evidence of recording thereon and certified by the appropriate county recorder's office or other filing office to be a true and complete copy of the original thereof submitted for recording, or a certificate from the title company that submitted such document or instrument for recording stating that such photocopy is a true and complete copy of the original thereof and that such title company has submitted such document or instrument for recording to the appropriate recording office) is delivered to the Trustee or a Custodian appointed thereby on or before the Closing Date. None of the Trustee, Custodian or the other Seller shall in any way be liable for any failure by a Seller or the Depositor to comply with the delivery requirements of the Mortgage Loan Purchase Agreements and this Section 2.01(b). Notwithstanding the foregoing, in the event that a Seller fails to deliver a UCC-3 on or before the Closing Date as required above solely because the related UCC-1 has not been returned to such Seller by the applicable filing office, the related Seller shall not be in breach of its obligations with respect to such delivery, provided that such Seller promptly forwards such UCC-1 to the Trustee upon its return. The Master Servicer shall cause such UCC-3 to be filed within 60 days of its receipt of the related UCC-1. In addition, in the event a commitment, binder or policy mark-up with respect to a title insurance policy has been delivered to the Custodian in lieu of an original title insurance policy, the Seller shall use its best efforts to deliver to the Custodian the related original title insurance policy within one year of the Closing Date. (c) Except under the circumstances provided for in the last sentence of this Section 2.01(c), the Master Servicer shall, as to each Mortgage Loan, promptly (and in any event within 90 days of the Closing Date) cause to be submitted for recording or filing, as the case may be, each assignment to the Trustee referred to in clauses (iii) and (v) of Section 2.01(b) and each UCC-1, UCC-2 and UCC-3 to the Trustee referred to in clause (viii) of Section 2.01(b) (except to the extent that any such submission for recording or filing has previously occurred). The Master Servicer shall make any of the filings set forth in the prior sentence and shall be reimbursed by the related Seller for all related costs of the filing and preparation of such documents. Each such - 45 - assignment shall reflect that it should be returned by the public recording office to the Trustee following recording, and each such UCC-1, UCC-2 and UCC-3 shall reflect that the file copy thereof should be returned to the Trustee following filing. If any such document or instrument is lost or returned unrecorded or unfiled because of a defect therein, the Master Servicer shall prepare or cause to be prepared a substitute therefor or cure such defect, as the case may be, and thereafter the Master Servicer shall upon receipt thereof cause the same to be duly recorded or filed, as appropriate. Notwithstanding the foregoing, there shall be no requirement to record any assignment to the Trustee referred to in clause (iii) or (v) of Section 2.01(b), or to file any UCC-1, UCC-2 or UCC-3 to the Trustee referred to in clause (viii) of Section 2.01(b), in those jurisdictions where, in the written opinion of local counsel (which opinion shall not be an expense of the Trust Fund) acceptable to the Depositor and the Trustee, such recordation and/or filing is not required to protect the Trustee's interest in the related Mortgage Loans against sale, further assignment, satisfaction or discharge by the related Seller, the Master Servicer, the Special Servicer, any subservicer or the Depositor. (d) All documents and records in the Depositor's or any Seller's possession relating to the Mortgage Loans (including financial statements, operating statements and any other information provided by the respective Mortgagor from time to time) that are not required to be a part of a Mortgage Loan File in accordance with Section 2.01(b) shall be delivered to the Master Servicer within 30 calendar days of the Closing Date and shall be held by the Master Servicer on behalf of the Trustee in trust for the benefit of the Certificateholders. (e) In connection with the Depositor's assignment pursuant to subsection (a) above, the Depositor shall deliver, and hereby represents and warrants that it has delivered, to the Trustee and the Master Servicer, on or before the Closing Date, a fully executed original counterpart of each Mortgage Loan Purchase Agreement, as in full force and effect, without amendment or modification, on the Closing Date. (f) The Depositor shall use its best efforts to require that, promptly after the Closing Date, but in all events within three Business Days after the Closing Date, each Seller shall cause all funds on deposit in escrow accounts maintained with respect to the Mortgage Loans in the name of such Seller or any other name to be transferred to the Master Servicer (or any subservicer) for deposit into Reserve Accounts. SECTION 2.02 ACCEPTANCE BY TRUSTEE. (a) The Trustee, by the execution and delivery of this Agreement, acknowledges receipt by it or a Custodian on its behalf, subject to the provisions of Section 2.01, of the documents specified in clause (i) of Section 2.01(b) with respect to each Mortgage Loan, and subject in addition to any exceptions to be noted in the Trustee Exception Report described in Section 2.02(e), the documents specified in clauses (ii), (iii), (vii) and (viii) of Section 2.01(b) with respect to each Mortgage Loan, of a fully executed original counterpart of each Mortgage Loan Purchase Agreement and of all other assets included in the Trust Fund, in good faith and without notice of any adverse claim, and declares that it or a Custodian on its behalf holds and will hold such documents and the other documents delivered or caused to be delivered by the related Seller constituting the Mortgage Loan Files, and that it holds and will hold such other assets included in the Trust Fund, in trust for the exclusive use and benefit of all present and future Certificateholders. - 46 - (b) Within 60 days of the Closing Date, the Trustee or a Custodian on its behalf shall review each of the Mortgage Loan documents delivered or caused to be delivered by a Seller constituting the Mortgage Loan Files; and, promptly following such review (but in no event later than 90 days after the Closing Date), the Trustee shall certify in writing to each of the Depositor, the Master Servicer, the Special Servicer and each Seller that, as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan specifically identified in any exception report annexed thereto as not being covered by such certification), (i) all documents specified in clauses (i), (ii), (iii), (vii) and (viii) of Section 2.01(b) are in its possession, (ii) all documents delivered or caused to be delivered by the Sellers constituting the Mortgage Loan Files have been reviewed by it or by a Custodian on its behalf and appear regular on their face and relate to such Mortgage Loan, and (iii) based on such examination and only as to the foregoing documents, the information set forth in the Mortgage Loan Schedule with respect to the items specified in clauses (a), (d) and (e) of the definition of "Mortgage Loan Schedule" is correct. (c) The Trustee or a Custodian on its behalf shall review each of the Mortgage Loan documents received thereby subsequent to the Closing Date; and, no later than the first anniversary of the Closing Date, the Trustee shall certify in writing to each of the Depositor, the Master Servicer, the Special Servicer and each Seller that, as to each Mortgage Loan listed on the Mortgage Loan Schedule (other than any Mortgage Loan as to which a Liquidation Event has occurred or any Mortgage Loan specifically identified in any exception report annexed thereto as not being covered by such certification), (i) all documents specified in clauses (i), (ii), (iii), (vii) and (viii) of Section 2.01(b) are in its possession, (ii) it or a Custodian on its behalf has received either a recorded or a filed original of each of the assignments specified in clause (iii), clause (v) and clause (viii) of Section 2.01(b) insofar as an unrecorded original thereof had been delivered or caused to be delivered by the related Seller or a copy of such recorded original certified by the applicable public recording office to be true and complete, (iii) all Mortgage Loan documents received by it or any Custodian have been reviewed by it or by such Custodian on its behalf and appear regular on their face and relate to such Mortgage Loan and (iv) based on the examinations referred to in subsection (b) above and this subsection (c) and only as to the foregoing documents, the information set forth in the Mortgage Loan Schedule with respect to the items specified in clauses (a), (d) and (e) of the definition of "Mortgage Loan Schedule" is correct. (d) It is herein acknowledged that neither the Trustee nor any Custodian is under any duty or obligation to inspect, review or examine any of the documents, instruments, certificates or other papers relating to the Mortgage Loans delivered to it to determine that the same are genuine, enforceable or appropriate for the represented purpose or that they are other than what they purport to be on their face. (e) If, in the process of reviewing the Mortgage Loan Files or at any time thereafter, the Trustee or any Custodian discovers any Defect, in a Mortgage Loan File, the Trustee shall promptly so notify the Depositor, the Master Servicer, the Special Servicer and the applicable Seller (and in no event later than 90 days after the Closing Date), by providing a written report (the "TRUSTEE EXCEPTION REPORT") setting forth for each affected Mortgage Loan, with particularity, the nature of such Defect. An individual Mortgage Loan File shall be deemed to have a "DEFECT" if (a) any document listed in clauses (i), (ii), (iii), (vii) and (viii) of Section 2.01(b) above required to be - 47 - included in the Mortgage Loan File is not in the possession of the Custodian, on behalf of the Trustee, within the time required to be delivered pursuant to this Agreement or (b) such document has not been properly executed or is otherwise defective on its face; PROVIDED, HOWEVER, that a document shall not be deemed to have a Defect if such Defect is caused by the failure by Depositor to execute such document after having been directed by the applicable Seller to execute such document. SECTION 2.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE DEPOSITOR; SELLERS' REPURCHASE OF MORTGAGE LOANS FOR DEFECTS IN MORTGAGE LOAN FILES AND BREACHES OF REPRESENTATIONS AND WARRANTIES. (a) The Depositor hereby represents and warrants that: (i) Depositor is duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with full corporate power and authority to own its assets and conduct its business as it is conducted, and is duly qualified as a foreign corporation in good standing in all jurisdictions in which the ownership or lease of its property or the conduct of its business requires such qualification (except where the failure to qualify would not have a materially adverse effect on the consummation of any transactions contemplated by this Agreement); (ii) The execution and delivery by Depositor of this Agreement and the performance of Depositor's obligations hereunder are within the corporate power of Depositor and have been duly authorized, executed and delivered by Depositor and neither the execution and delivery by Depositor of this Agreement nor the compliance by Depositor with the provisions hereof, nor the consummation by Depositor of transactions contemplated by this Agreement, will (i) conflict with or result in a breach of, or constitute a default under, the certificate of incorporation or by-laws of Depositor or, after giving effect to the consents or taking of the actions contemplated by clause (ii) below any of the provisions of any law, governmental rule, regulation, judgment, decree or order binding on Depositor or its properties, or any of the provisions of any material indenture or mortgage or any other material contract or other instrument to which Depositor is a party or by which it is bound or result in the creation or imposition of any lien, charge or encumbrance upon any of its properties pursuant to the terms of any such indenture, mortgage, contract or other instrument or (ii) require the consent of or notice to, or any filing with any person, entity or governmental body, which has not been obtained or made by Depositor, except where, in any of the instances contemplated by clause (i) or clause (ii) above, the failure to do so will not have a material adverse effect on the consummation of any transactions contemplated by this Agreement; (iii) This Agreement has been duly executed and delivered by Depositor and, assuming the due authorization, execution and delivery of this Agreement by the other parties hereto, this Agreement constitutes a legal, valid and binding instrument, enforceable against Depositor in accordance with its terms, subject, as to the enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and other laws affecting the rights of creditors generally and to general principles of equity and the discretion of the court - 48 - (regardless of whether enforcement of such remedies is considered in a proceeding in equity or at law) and, as to rights of indemnification hereunder, subject to limitations of public policy under applicable securities laws; (iv) There is no litigation, charge, investigation, action, suit or proceeding by or before any court, regulatory authority or governmental agency or body pending or, to the knowledge of Depositor, threatened against Depositor the outcome of which could be reasonably expected to materially adversely affect the consummation of any transactions contemplated by this Agreement; and (v) The Depositor is the lawful owner of the Mortgage Loans with the full right to transfer the Mortgage Loans to the Trust Fund and the Mortgage Loans have been validly transferred to the Trust. (b) If the Master Servicer, any subservicer, the Special Servicer or the Trustee discovers or receives notice of a Defect in any Mortgage Loan File or a breach of any representation or warranty set forth in, or required to be made with respect to a Mortgage Loan by a Seller pursuant to, the related Mortgage Loan Purchase Agreement (a "BREACH"), which Defect or Breach, as the case may be, materially and adversely affects the value of any Mortgage Loan or the interests of the Certificateholders therein, the Master Servicer, the Special Servicer or the Trustee, as applicable, shall give prompt written notice of such Defect or Breach, as the case may be, to the Depositor, the Master Servicer, the Special Servicer, the Trustee, the related Seller and the Rating Agencies (provided, however, that in case a subservicer discovers or receives notice of any Defect or Breach, the Master Servicer shall follow the requirements set forth above only upon receipt of written notice of such Defect or Breach from such subservicer, as provided in the applicable subservicing agreement) and shall request that such Seller, not later than 90 days from the earlier of such Seller's receipt of such notice or such Seller's discovery of such Breach, cure such Defect or Breach, as the case may be, in all material respects or repurchase the affected Mortgage Loan at the applicable Repurchase Price or in conformity with the related Mortgage Loan Purchase Agreement. Any Defect or Breach which causes any Mortgage Loan not to be a "qualified mortgage" (within the meaning of Section 860G(a)(3) of the Code) shall be deemed to materially and adversely affect the interest of Certificateholders therein. If the affected Mortgage Loan is to be repurchased, the Trustee shall designate the Certificate Account as the account into which funds in the amount of the Repurchase Price are to be deposited by wire transfer. Each Seller shall be responsible for its own obligations hereunder and under the applicable Mortgage Loan Purchase Agreement and such Seller shall have no liability or duty to repurchase any Mortgage Loan as a result of the other Seller's defaults or any Breach or Defect relating to any Mortgage Loan assigned to the Trustee by such other Seller. (c) In connection with any repurchase of a Mortgage Loan contemplated by this Section 2.03, the Trustee, the Master Servicer and the Special Servicer shall each tender to the applicable Seller, upon delivery to each of the Trustee, the Master Servicer and the Special Servicer of a trust receipt executed by such Seller, all portions of the Mortgage Loan File and other documents pertaining to such Mortgage Loan possessed by it, and each document that constitutes a part of the Mortgage Loan File that was endorsed or assigned to the Trustee shall be endorsed or assigned, as the case may be, to such Seller in the same manner as provided in Section 7 of the related Mortgage Loan Purchase Agreement. - 49 - (d) Section 2.04(b) of this Agreement and Section 7 of each Mortgage Loan Purchase Agreement provide the sole remedy available to the Certificateholders, or the Trustee on behalf of the Certificateholders, respecting any Defect in a Mortgage Loan File or any Breach of any representation or warranty set forth in Section 6 of such Mortgage Loan Purchase Agreement. (e) The Master Servicer and the Special Servicer (in the case of Specially Serviced Mortgage Loans) shall, for the benefit of the Certificateholders, enforce the obligations of each Seller under Section 7 of the Mortgage Loan Purchase Agreements. Such enforcement, including, without limitation, the legal prosecution of claims, shall be carried out in such form, to such extent and at such time as the Master Servicer or the Special Servicer, as the case may be, would require were it, in its individual capacity, the owner of the affected Mortgage Loan(s). The Master Servicer and the Special Servicer, as the case may be, shall be reimbursed for the reasonable costs of such enforcement: FIRST, from a specific recovery of costs, expenses or attorneys' fees against the applicable Seller; SECOND, pursuant to Section 3.06(viii) out of the related Repurchase Price, to the extent that such expenses are a specific component thereof; and THIRD, if at the conclusion of such enforcement action it is determined that the amounts described in clauses FIRST and SECOND are insufficient, then pursuant to Section 3.06(vii) out of general collections on the Mortgage Loans on deposit in the Certificate Account. SECTION 2.04 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER SERVICER AND SPECIAL SERVICER. (a) The Master Servicer, as Master Servicer, warrants and covenants that as of the Closing Date or as of such date specifically provided herein: (i) The Master Servicer is a corporation, duly organized, validly existing and in good standing under the laws of the State of Texas and is in compliance with the laws of each state in which any Mortgaged Property is located (and any other necessary state) to the extent necessary to comply with its duties and responsibilities hereunder with respect to each Mortgage Loan in accordance with the terms of this Agreement; (ii) The Master 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 Master Servicer and its performance and compliance with the terms of this Agreement will not violate the Master Servicer's charter or by-laws or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which the Master Servicer is a party or which may be applicable to the Master Servicer or any of its assets; (iii) This Agreement has been duly and validly authorized, executed and delivered by the Master Servicer and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding obligation of the Master 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 - 50 - by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and public policy considerations underlying the securities laws to the extent that such considerations limit the enforceability of the provisions of this Agreement that may, or purport to, provide for indemnification of securities law violations, and all requisite corporate action has been taken by the Master Servicer to make this Agreement and all agreements contemplated hereby valid and binding upon the Master Servicer in accordance with their terms; (iv) The Master Servicer is not in violation of, and the execution and delivery of this Agreement by the Master Servicer and its performance and compliance with the terms of this Agreement will not constitute a violation with respect to, any order or decree of any court binding on the Master Servicer or any order or regulation of any federal, state, municipal or governmental agency having jurisdiction, or result in the creation or imposition of any lien, charge or encumbrance which, in any such event, would have consequences that would materially and adversely affect the condition (financial or otherwise) or operation of the Master Servicer or its properties or impair the ability of the Trust Fund to realize on the Mortgage Loans; (v) There is no action, suit, proceeding or investigation pending or, to the knowledge of the Master Servicer, threatened against the Master Servicer which if adversely determined, either in any one instance or in the aggregate, would result in any material adverse change in the business, operations, financial condition, properties or assets of the Master Servicer, or would, if adversely determined, materially impair the ability of the Master Servicer, to carry on its business substantially as now conducted, or in any material liability on the part of the Master Servicer, or which would draw into question the validity of this Agreement or the Mortgage Loans or of any action taken or to be taken in connection with the obligations of the Master Servicer contemplated herein, or which would be likely to impair materially the ability of the Master Servicer to perform under the terms of this Agreement; (vi) No consent, approval, authorization or order of, or registration or filing with, or notice to any court or governmental agency or body, the failure to obtain which would have a material adverse effect on the ability of the Master Servicer to perform its obligations hereunder, is required on or before the Closing Date for the execution, delivery and performance by the Master Servicer of or compliance by the Master Servicer with this Agreement, or if required, such approval has been obtained prior to the Cut-off Date; (vii) The Master Servicer maintains errors and omissions insurance covering all Persons to be involved in the performance of its duties under this Agreement; (viii) The Master Servicer acknowledges and agrees that the Servicing Compensation represents reasonable compensation; and (ix) The Master Servicer has examined each existing subservicing agreement and will examine each future subservicing agreement and is (or will be) familiar with the terms - 51 - thereof and the terms of such agreements are not and will not be materially inconsistent with the provisions of this Agreement. (b) The Special Servicer, as Special Servicer, hereby represents, warrants and covenants that as of the Closing Date or as of such date specifically provided herein: (i) The Special Servicer is limited partnership, duly organized, validly existing and in good standing under the laws of the State of Missouri and is in compliance with the laws of each state in which any Mortgaged Property is located (and any other necessary state) to the extent necessary to comply with its duties and responsibilities hereunder with respect to each Mortgage Loan in accordance with the terms of this Agreement; (ii) The Special Servicer has the full power, authority and legal right to execute and deliver this Agreement and to perform in accordance herewith; the execution and delivery of this Agreement by the Special Servicer and its performance and compliance with the terms of this Agreement will not violate the Special Servicer's partnership agreement or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which the Special Servicer is a party or which may be applicable to the Special Servicer or any of its assets; (iii) This Agreement has been duly and validly authorized, executed and delivered by the Special Servicer and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a legal, valid and binding obligation of the Special Servicer, enforceable against it in accordance with the terms of this Agreement, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, liquidation, receivership, moratorium or other laws relating to or affecting creditors' rights generally, or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and public policy considerations underlying the securities laws to the extent that such considerations limit the enforceability of the provisions of this Agreement that may, or purport to, provide for indemnification of securities law violations, and all requisite partnership action has been taken by the Special Servicer to make this Agreement and all agreements contemplated hereby valid and binding upon the Special Servicer in accordance with their terms; (iv) The Special Servicer is not in violation of, and the execution and delivery of this Agreement by the Special Servicer and its performance and compliance with the terms of this Agreement will not constitute a violation with respect to, any order or decree of any court binding on the Special Servicer or any order or regulation of any federal, state, municipal or governmental agency having jurisdiction, or result in the creation or imposition of any lien, charge or encumbrance which, in any such event, would have consequences that would materially and adversely affect the condition (financial or otherwise) or operation of the Special Servicer or its properties or impair the ability of the Trust Fund to realize on the Mortgage Loans; - 52 - (v) There is no action, suit, proceeding or investigation 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, financial condition, properties or assets of the Special Servicer, or would, if adversely determined, materially impair the ability of the Special Servicer, to carry on its business substantially as now conducted, or in any material liability on the part of the Special Servicer, or which would draw into question the validity of this Agreement or the Mortgage Loans or of any action taken or to be taken in connection with the obligations of the Special Servicer contemplated herein, or which would be likely to impair materially the ability of the Special Servicer to perform under the terms of this Agreement; (vi) No consent, approval, authorization or order of, or registration or filing with, or notice to any court or governmental agency or body, the failure to obtain which would have a material adverse effect on the ability of the Special Servicer to perform its obligations hereunder, is required on or before the Closing Date 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; (vii) The Special Servicer maintains errors and omissions insurance covering all officers and employees to be involved in the performance of its duties under this Agreement; (viii) The Special Servicer acknowledges and agrees that the Special Servicing Compensation represents reasonable compensation and that the entire Special Servicing Compensation shall be treated for accounting and tax purposes as compensation for servicing and administration of the Mortgage Loans; and (ix) The Special Servicer has examined each existing subservicing agreement and will examine each future subservicing agreement and is (or will be) familiar with the terms thereof and the terms of such agreements are not and will not be materially inconsistent with the provisions of this Agreement. (c) It is understood and agreed that the representations and warranties set forth in this Section shall survive delivery of the respective Mortgage Loan Files to the Trustee or the Custodian on behalf of the Trustee until the termination of this Agreement, and shall inure to the benefit of the Trustee, the Depositor and the Master Servicer or Special Servicer, as the case may be. Upon discovery by the Depositor, the Master Servicer, Special Servicer or a Responsible Officer of the Trustee (or upon written notice thereof from any Certificateholder) of a breach of any of the representations and warranties set forth in this Section which materially and adversely affects the interests of the Certificateholders, the Master Servicer, Special Servicer or the Trustee in any Mortgage Loan, the party discovering such breach shall give prompt written notice to the other parties hereto and each Seller. - 53 - SECTION 2.05 EXECUTION AND DELIVERY OF CERTIFICATES; ISSUANCE OF REMIC I REGULAR INTERESTS AND REMIC II REGULAR INTERESTS. The Trustee acknowledges the assignment to it of the Mortgage Loans and the delivery of the Mortgage Loan Files to the Custodian (to the extent the documents constituting the Mortgage Loan Files are actually delivered to the Custodian), subject to the provisions of Section 2.01 and Section 2.02 and, concurrently with such delivery, (i) acknowledges the issuance of and hereby declares that it holds the REMIC I Regular Interests on behalf of REMIC II, (ii) acknowledges the issuance of and hereby declares that it holds the REMIC II Interests on behalf of REMIC III and the Holders of the REMIC III Certificates and (iii) 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 A1, Class A2, Class A3, Class B, Class C, Class D, Class E, Class F, Class X, Class G, Class H, Class J, Class K, Class L, Class R-I, Class R-II and Class R-III Certificates in authorized denominations, in each case registered in the names set forth in such order or so directed in this Agreement and duly authenticated by the Authenticating Agent, which Certificates (described in the preceding clause (iii)), REMIC I Regular Interests and REMIC II Regular Interests evidence ownership of the entire Trust Fund, other than Default Interest, Excess Interest, Escrow Accounts, Lock-Box Accounts, Cash Collateral Accounts and Reserve Accounts. SECTION 2.06 MISCELLANEOUS REMIC PROVISIONS. (a) The REMIC I Regular Interests are hereby designated as "regular interests" in REMIC I within the meaning of Section 860G(a)(1) of the Code, and the Class R-I Certificates are hereby designated as the sole Class of "residual interests" in REMIC I within the meaning of Section 860G(a)(2) of the Code. The REMIC II Regular Interest A-1, REMIC II Regular Interest A-2, REMIC II Regular Interest A-3, REMIC II Regular Interest B, REMIC II Regular Interest C, REMIC II Regular Interest D, REMIC II Regular Interest E, REMIC II Regular Interest F, REMIC II Regular Interest G, REMIC II Regular Interest H, REMIC II Regular Interest J, REMIC II Regular Interest K and REMIC II Regular Interest L are hereby designated as "regular interests" in REMIC II within the meaning of Section 860G(a)(1) of the Code and the Class R-II Certificates are hereby designated as the sole Class of "residual interests" in REMIC II within the meaning of Section 860G(a)(2). The Class A1, Class A2, Class A3, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K and Class L Certificates and each Class X Component are hereby designated as "regular interests" in REMIC III within the meaning of Section 860G(a)(1) of the Code and the Class R-III Certificates are hereby designated as the sole Class of "residual interests" in REMIC III within the meaning of Section 860G(a)(2) of the Code. The Closing Date is hereby designated as the "Startup Day" of REMIC I, REMIC II and REMIC III within the meaning of Section 860G(a)(9) of the Code. The "latest possible maturity date" of the REMIC I Regular Interests, REMIC II Regular Interests and the REMIC III Certificates for purposes of Section 860G(a)(1) of the Code is the Rated Final Distribution Date. (b) None of the Depositor, the Trustee, the Master Servicer, the Fiscal Agent or the Special Servicer shall enter into any arrangement by which the Trust Fund will receive a fee or other compensation for services other than as specifically contemplated herein. - 54 - ARTICLE III ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS SECTION 3.01 MASTER SERVICER TO ACT AS SERVICER; ADMINISTRATION OF THE MORTGAGE LOANS. (a) The Master Servicer and the Special Servicer, each as an independent contractor servicer, shall service and administer the Mortgage Loans on behalf of the Trust Fund and the Trustee (as trustee for Certificateholders) in accordance with the Servicing Standard and the Special Servicing Standard, as applicable. The Master Servicer's or Special Servicer's liability for actions and omissions in its capacity as Servicer or Special Servicer, as the case may be, hereunder is limited as provided herein (including, without limitation, pursuant to Section 6.03 hereof). To the extent consistent with the foregoing and subject to any express limitations set forth in this Agreement, the Master Servicer and Special Servicer shall seek to maximize the timely and complete recovery of principal and interest on the Mortgage Notes; PROVIDED, HOWEVER, that nothing herein contained shall be construed as an express or implied guarantee by the Master Servicer or Special Servicer of the collectability of the Mortgage Loans. Subject only to the Servicing Standard and the Special Servicing Standard, as applicable, the Master Servicer and Special Servicer shall have full power and authority, acting alone or through subservicers (subject to paragraph (c) of this Section 3.01 and to Section 3.02), to do or cause to be done any and all things in connection with such servicing and administration which it may deem consistent with the Servicing Standard and the Special Servicing Standard, as applicable, and, in its reasonable judgment, in the best interests of the Certificateholders, including, without limitation, with respect to each Mortgage Loan, to prepare, execute and deliver, on behalf of the Certificateholders and the Trustee or any of them: (i) any and all financing statements, continuation statements and other documents or instruments necessary to maintain the lien on each Mortgaged Property and related collateral; (ii) subject to the terms of this Agreement including but not limited to Section 3.29 below, any modifications, waivers, consents or amendments to or with respect to any documents contained in the related Mortgage Loan File; and (iii) any and all instruments of satisfaction or cancellation, or of partial or full release or discharge, and all other comparable instruments, with respect to the Mortgage Loans and the Mortgaged Properties. In addition, the Master Servicer or, with respect to Specially Serviced Mortgage Loans, the Special Servicer shall determine, in a manner consistent with the Servicing Standard, or the Special Servicing Standard, as applicable, and subject to Section 3.09, whether to exercise any right the mortgagee may have under any "due-on-sale" on "due-on-encumbrance" clause to accelerate payment of the related Mortgage Loan upon, or to withhold its consent to, any transfer or further encumbrance of the related Mortgaged Property. Subject to Section 3.11, the Trustee shall, upon the receipt of a written request of a Servicing Officer, execute and deliver to the Master Servicer and Special Servicer any powers of attorney and other documents prepared by the Master Servicer and Special Servicer and necessary or appropriate (as certified in such written request) to enable the Master Servicer and Special Servicer to carry out their servicing and administrative duties hereunder. With respect to its own use of or actions under any such power of attorney (but not any use made by the other Servicer), each of the Master Servicer and the Special Servicer shall indemnify the Trustee and the Fiscal Agent and - 55 - their respective Affiliates and each of the directors, officers, employees and agents of the Trustee, the Fiscal Agent and their respective Affiliates and hold each of them harmless against any and all claims, losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and any other costs, fees and expenses that any such Person may sustain in connection with or as a result of any use made of any such power of attorney by the Master Servicer or the Special Servicer, as applicable, the Master Servicer's or the Special Servicer's respective willful misconduct, bad faith, fraud and/or negligence in connection therewith or by reason of reckless disregard of its obligations and duties hereunder in connection therewith. (b) Unless otherwise provided in the related Mortgage Note, the Master 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. (c) Each of the Master Servicer and the Special Servicer may enter into subservicing agreements with third parties with respect to any of its respective obligations hereunder, PROVIDED, that (i) any such agreement shall be consistent with the provisions of this Agreement and (ii) a subservicer retained by the Master Servicer or the Special Servicer, as applicable, shall forward to the Trustee with copies to the Master Servicer any original document evidencing an assumption, modification, consolidation or extension of any Mortgage Loan entered into in accordance with the applicable subservicing agreement within thirty (30) days of its execution, PROVIDED, HOWEVER, that the subservicer shall provide the Trustee and Master Servicer with a certified true copy of any such document submitted for recordation within thirty (30) days of its execution, and shall use its best efforts to provide the original of any document submitted for recordation or a copy of such document certified by the appropriate public recording office or the title company that submitted such document for recording to be a true and complete copy of the original within one hundred twenty (120) days of its submission for recordation, and PROVIDED FURTHER, that any such agreement with respect to a Mortgage Loan, and any foreclosure on a Mortgaged Property by a subservicer, shall require the approval of the Master Servicer or the Special Servicer, as applicable, prior to the execution thereof, consistent with the terms and provisions of this Agreement, and (iii) such agreement shall be consistent with the Servicing Standard or the Special Servicing Standard, as applicable. Any such subservicing agreement may permit the subservicer to delegate its duties to agents or subcontractors so long as the related agreements or arrangements with such agents or subcontractors are consistent with the provisions of this Section 3.01(c). Any subservicing agreement entered into by the Master Servicer or the Special Servicer, as applicable, shall provide that it may be assumed or, terminated by the Trustee or the Master Servicer, respectively, if the Trustee or the Master Servicer, respectively, has assumed the duties of the Master Servicer or the Special Servicer, respectively, or any successor Master Servicer or Special Servicer, as applicable, without cost or obligation to the assuming or terminating party or the Trust Fund, upon the assumption by such party of the obligations of the Master Servicer or the Special Servicer, as applicable, pursuant to Section 7.02. Any subservicing agreement, and any other transactions or services relating to the Mortgage Loans involving a subservicer shall be deemed to be between the Master Servicer or the Special Servicer, as applicable, and such subservicer alone, and the Trustee and the Certificateholders shall - 56 - not be deemed parties thereto and shall have no claims, rights, obligations, duties or liabilities with respect to the subservicer, except as set forth in Section 3.01(d). (d) If the Trustee or any successor Master Servicer assumes the obligations of the Master Servicer, or if the Master Servicer or any successor Special Servicer assumes the obligations of the Special Servicer, in each case in accordance with Section 7.02, the Trustee, the Master Servicer or such successor, as applicable, to the extent necessary to permit the Trustee, the Master Servicer or such successor, as applicable, to carry out the provisions of Section 7.02, shall, without act or deed on the part of the Trustee, the Master Servicer or such successor, as applicable, succeed to all of the rights and obligations of the Master Servicer or the Special Servicer, as applicable, under any subservicing agreement entered into by the Master Servicer or the Special Servicer, as applicable, pursuant to Section 3.01(c), subject to the right of termination by the Trustee or Master Servicer set forth in Section 3.01(c). In such event, the Trustee, the Master Servicer or the successor Master Servicer or Special Servicer, as applicable, shall be deemed to have assumed all of the Master Servicer's or the Special Servicer's interest, as applicable, therein (but not any liabilities or obligations in respect of acts or omissions of the Master Servicer or the Special Servicer, as applicable, prior to such deemed assumption) and to have replaced the Master Servicer or the Special Servicer, as applicable, as a party to such subservicing agreement to the same extent as if such subservicing agreement had been assigned to the Trustee, the Master Servicer or such successor Master Servicer or successor Special Servicer, as applicable, except that the Master Servicer or the Special Servicer, as applicable, shall not thereby be relieved of any liability or obligations under such subservicing agreement that accrued prior to the succession of the Trustee, the Master Servicer or the successor Master Servicer or successor Special Servicer, as applicable. In the event that the Trustee, the Master Servicer or any successor Master Servicer or Special Servicer, as applicable, assumes the servicing obligations of the Master Servicer or the Special Servicer, as applicable, upon request of the Trustee, the Master Servicer or such successor Master Servicer or Special Servicer, as applicable, the Master Servicer or Special Servicer shall at its own expense (except in the event that the Master Servicer or Special Servicer is terminated pursuant to Section 6.04(c), in which event, at the expense of the Certificateholders effecting such termination) deliver to the Trustee, the Master Servicer or such successor Master Servicer or Special Servicer, as applicable, all documents and records relating to any subservicing agreement and the Mortgage Loans then being serviced thereunder and an accounting of amounts collected and held by it, if any, and will otherwise use its best efforts to effect the orderly and efficient transfer of any subservicing agreement to the Trustee, the Master Servicer or the successor Master Servicer or Special Servicer, as applicable. SECTION 3.02 LIABILITY OF THE MASTER SERVICER. Notwithstanding any subservicing agreement, any of the provisions of this Agreement relating to agreements or arrangements between the Master Servicer or Special Servicer and any Person acting as subservicer (or its agents or subcontractors) or any reference to actions taken through any Person acting as subservicer or otherwise, the Master Servicer or Special Servicer, as applicable, shall remain obligated and primarily liable to the Trustee and Certificateholders for the servicing and administering of the Mortgage Loans in accordance with the provisions of this Agreement without diminution of such obligation or liability by virtue of such subservicing - 57 - agreements or arrangements or by virtue of indemnification from the Depositor or any other Person acting as subservicer (or its agents or subcontractors) to the same extent and under the same terms and conditions as if the Master Servicer or Special Servicer, as applicable, alone were servicing and administering the Mortgage Loans. Each of the Master Servicer and the Special Servicer shall be entitled to enter into an agreement with any subservicer providing for indemnification of the Master Servicer or Special Servicer, as applicable, by such subservicer, 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 3.03 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS. The Master Servicer or the Special Servicer, as applicable, shall use reasonable efforts to collect all payments called for under the terms and provisions of the Mortgage Loans it is obligated to service hereunder, and shall follow the Servicing Standard or the Special Servicing Standard, as applicable, with respect to such collection procedures. The Special Servicer with respect to the Specially Serviced Mortgage Loans and the Master Servicer with respect to the other Mortgage Loans shall use its reasonable efforts to collect income statements and rent rolls from Mortgagors as required by the Loan Documents and the terms hereof and the Special Servicer shall provide copies thereof to the Master Servicer as provided herein. The Master Servicer shall provide reasonable advance notice to the Special Servicer and Mortgagors of Balloon Payments coming due. Consistent with the foregoing, the Master Servicer or Special Servicer, as applicable, may in its discretion waive any late payment charge in connection with any delinquent Monthly Payment or Balloon Payment with respect to any Mortgage Loan or Specially Serviced Mortgage Loan, as applicable. In addition, the Master Servicer and Special Servicer shall be entitled to take such actions with respect to the collection of payments on the Mortgage Loans as are permitted or required under Section 3.28 hereof. SECTION 3.04 COLLECTION OF TAXES, ASSESSMENTS AND SIMILAR ITEMS; ESCROW ACCOUNTS. (a) With respect to each Mortgage Loan (other than any REO Mortgage Loan), the Master Servicer shall maintain accurate records with respect to each related Mortgaged Property reflecting the status of taxes, assessments and other similar items that are or may become a lien on the related Mortgaged Property and the status of insurance premiums payable with respect thereto. From time to time, the Master Servicer shall (i) obtain all bills for the payment of such items (including renewal premiums), and (ii) effect payment of all such bills with respect to such Mortgaged Properties prior to the applicable penalty or termination date, in each case employing for such purpose Escrow Payments as allowed under the terms of the related Mortgage Loan. If a Mortgagor fails to make any such payment on a timely basis or collections from the Mortgagor are insufficient to pay any such item before the applicable penalty or termination date, the Master Servicer shall advance the amount of any shortfall as a Property Advance unless the Master Servicer determines in its good faith business judgment that such Advance would be a Nonrecoverable Advance. The Master Servicer shall be entitled to reimbursement of Advances, with interest thereon at the Advance Rate, that it makes pursuant to the preceding sentence from amounts received on or in respect of the related Mortgage Loan respecting which such Advance was made or if such Advance has become a Nonrecoverable Advance, to the extent permitted by Section 3.06 of this Agreement. No costs incurred by the Master Servicer in effecting the payment of taxes and - 58 - 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 Master Servicer shall segregate and hold all funds collected and received pursuant to any Mortgage Loan constituting Escrow Payments separate and apart from any of its own funds and general assets and shall establish and maintain one or more segregated custodial accounts (each, an "ESCROW ACCOUNT") into which all Escrow Payments shall be deposited within one (1) Business Day of being posted by the Master Servicer (including all Escrow Payments received from the Special Servicer in respect of Specially Serviced Mortgage Loans). The Master Servicer shall also deposit into each Escrow Account any amounts representing losses on Permitted Investments pursuant to Section 3.07(b) and any Insurance Proceeds or Liquidation Proceeds which are required to be applied to the restoration or repair of any Mortgaged Property pursuant to the related Mortgage Loan. Escrow Accounts shall be Eligible Accounts (except to the extent the related Mortgage Loan requires it to be held in an account that is not an Eligible Account) and shall be entitled "__________________________, as Master Servicer, in trust for __________________________, as Trustee in trust for Holders of ICIFC Assets Corp., Mortgage Pass-Through Certificates, Series 199__-__, and Various Mortgagors". Withdrawals from an Escrow Account may be made by the Master Servicer only: (i) to effect timely payments of items constituting Escrow Payments for the related Mortgaged Property; (ii) to transfer funds to the Collection Account to reimburse the Master 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 or late charges or other fees related thereto; (iii) for application to the restoration or repair of the related Mortgaged Property in accordance with the related Mortgage Loan and the Servicing Standard; (iv) to clear and terminate such Escrow Account upon the termination of this Agreement; (v) to pay from time to time to the related Mortgagor any interest or investment income earned on funds deposited in the Escrow Account if such income is required to be paid to the related Mortgagor under law or by the terms of the Mortgage Loan, or otherwise to the Master Servicer; and (vi) to remove any funds deposited in an Escrow Account that were not required to be deposited therein. - 59 - SECTION 3.05 COLLECTION ACCOUNT AND CERTIFICATE ACCOUNT. (a) The Master Servicer shall establish and maintain or cause to be established and maintained the Collection Account in the Trustee's name, for the benefit of the Certificateholders and the Trustee as the Holder of the REMIC I Regular Interests and REMIC II Regular Interests. The Collection Account shall be established and maintained as an Eligible Account. The Master Servicer shall deposit or cause to be deposited in the Collection Account within two Business Days of being posted by the Master Servicer, the following payments and collections received or made by it on or with respect to the Mortgage Loans, except that payments and collections received by the applicable Seller after the Cut-off Date, after application of all Monthly Payments due on or before such date, will be deposited in the Collection Account on the later of the Closing Date or the Business Day following the receipt thereof by the Seller: (i) all payments on account of principal on the Mortgage Loans, including the principal component of Unscheduled Payments; (ii) all payments on account of interest on the Mortgage Loans and the interest portion of all Unscheduled Payments and all Prepayment Premiums and Yield Maintenance Charges; (iii) any amounts required to be deposited pursuant to Section 3.07(b), in connection with net losses realized on Permitted Investments with respect to funds held in the Collection Account; (iv) all Net REO Proceeds withdrawn from an REO Account pursuant to Section 3.17(b); (v) any amounts received from Mortgagors which represent recoveries of Property Protection Expenses, to the extent not permitted to be retained by the Master Servicer or the Special Servicer as provided herein or required to be deposited in an Escrow Account; (vi) any other amounts required by the provisions of this Agreement to be deposited into the Collection Account by the Master Servicer or Special Servicer, including, without limitation, proceeds of any repurchase of a Mortgage Loan pursuant to Section 2.03(b) hereof; and (vii) any Servicer Prepayment Interest Shortfalls for the next Distribution Date into the Collection Account on the Remittance Date. The foregoing requirements for deposits in the Collection Account shall be exclusive, it being understood and agreed that, without limiting the generality of the foregoing, payments in the nature of late payment charges (subject to Section 3.12 hereof), Assumption Fees, loan modification fees, loan service transaction fees, extension fees, demand fees, beneficiary statement charges and similar fees need not be deposited in the Collection Account by the Master Servicer and, to the extent permitted by applicable law, the Master Servicer or the Special Servicer, as applicable in accordance - 60 - with Section 3.12 hereof, shall be entitled to retain any such charges and fees received with respect to the Mortgage Loans. In the event that the Master Servicer deposits in the Collection Account any amount not required to be deposited therein, it may at any time withdraw such amount from the Collection Account, any provision herein to the contrary notwithstanding. (b) The Trustee shall establish and maintain the Certificate Account in the name of the Trustee, in trust for the benefit of the Certificateholders and the Trustee as the Holder of the REMIC I Regular Interests and REMIC II Regular Interests. The Certificate Account shall be established and maintained as an Eligible Account. (c) Funds in the Collection Account and the Certificate Account may only be invested in Permitted Investments in accordance with the provisions of Section 3.07. The Master 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 3.06 PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT. The Master 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 Certificate Account the amounts required to be deposited in the Certificate Account pursuant to Section 4.06; (ii) to pay or reimburse the Trustee, the Fiscal Agent and the Master Servicer for Advances (PROVIDED, that the Trustee and Fiscal Agent shall have priority with respect to such payment or reimbursement), the Master Servicer's right to reimburse any such Person pursuant to this clause (ii) being limited to either (x) any collections on or in respect of the particular Mortgage Loan or REO Property with respect to which such Advance was made, 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 reimbursed from recoveries in respect of the related Mortgage Loan or REO Property after a Final Recovery Determination; (iii) (A) to pay to the Master Servicer, the Trustee or the Fiscal Agent the Advance Interest Amount relating to P&I Advances, and (B) to pay to the Master Servicer, the Trustee or the Fiscal Agent any Advance Interest Amounts not relating to any P&I Advances (provided that in the case of both (A) and (B), the Trustee and the Fiscal Agent shall have priority with respect to such payments); (iv) to pay on or before each Remittance Date to the Master Servicer and the Special Servicer, as applicable, as compensation, the aggregate unpaid Servicing Compensation and Special Servicing Compensation, respectively, to be paid, in the case of the Servicing Fee, from interest received on the related Mortgage Loan, and in the case of the Special Servicing Fee and Principal Recovery Fee, as provided in Section 3.12, and to pay from time to time to the Master Servicer in accordance with Section 3.07(b) any interest or investment income earned on funds deposited in the Collection Account (the Master Servicer may rely on a certification of the Special Servicer as to amounts of Special - 61 - Servicing Compensation to be withdrawn pursuant to this clause (iv)); PROVIDED, HOWEVER, that the Servicing Compensation other than the Servicing Fee and the Special Servicing Compensation other than the Special Servicing Fee shall be paid to the Master Servicer and the Special Servicer, as applicable, only to the extent received, in accordance with Section 3.12; (v) to remit to the Certificate Account, an amount equal to the Trustee Fee in respect of the immediately preceding month to be paid from interest received on the related Mortgage Loan; (vi) to pay on or before each Distribution Date to the applicable Seller or other Originator, as the case may be, with respect to each Mortgage Loan or REO Property that has previously been purchased or repurchased by it pursuant to Section 2.03(b) or Section 3.18 all amounts received thereon during the related Collection Period and subsequent to the date as of which the amount required to effect such purchase or repurchase was determined; (vii) to the extent not reimbursed or paid pursuant to any other clause of this Section 3.06, to reimburse or pay the Master Servicer, the Trustee, the Special Servicer, the Depositor or the Fiscal Agent, as applicable, for unpaid Servicing Compensation, Special Servicing Compensation and other unpaid items incurred by such Person pursuant to any provision of this Agreement pursuant to which such Person is entitled to reimbursement or payment from the Trust Fund, in each case only to the extent reimbursable under such Section, it being acknowledged that this clause (vii) shall not be deemed to modify the substance of any such Section, including the provisions of such Section that set forth the extent to which one of the foregoing Persons is or is not entitled to payment or reimbursement; (viii) to reimburse itself, the Special Servicer, the Depositor or the Trustee, as the case may be, for any unreimbursed expenses reasonably incurred by such Person in respect of any Breach or Defect giving rise to a repurchase obligation of any Mortgage Loan Seller under Section 7 of the related Mortgage Loan Purchase Agreement, including, without limitation, any expenses arising out of the enforcement of the repurchase obligation, each such Person's right to reimbursement pursuant to this clause (viii) with respect to any Mortgage Loan being limited to that portion of the Purchase Price paid for such Mortgage Loan that represents such expense in accordance with clause (iv) of the definition of Repurchase Price; (ix) to transfer to the Trustee for deposit in one or more separate, non-interest bearing accounts any amount reasonably determined by the Trustee to be necessary to pay any applicable federal, state or local taxes imposed on REMIC I, REMIC II or REMIC III under the circumstances and to the extent described in Section 4.05; (x) to withdraw any amount deposited into the Collection Account that was not required to be deposited therein; and (xi) to clear and terminate the Collection Account pursuant to Section 9.01. - 62 - The Master Servicer shall keep and maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from the Collection Account pursuant to clauses (ii)-(viii) and (x) above. The Master Servicer shall pay to the Trustee, the Fiscal Agent 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, the Fiscal Agent or the Special Servicer therefrom, promptly upon receipt of a certificate of a Responsible Officer of the Trustee or the Fiscal Agent or a certificate of a Servicing Officer, as applicable, describing the item and amount to which such Person is entitled. The Master Servicer may rely conclusively on any such certificate and shall have no duty to recalculate the amounts stated therein. The Trustee, the Fiscal Agent, the Special Servicer and the Master Servicer shall in all cases have a right prior to the Certificateholders to any funds on deposit in the Collection Account from time to time for the reimbursement or payment of the Servicing Compensation (including investment income), or Trustee Fees, Special Servicing Compensation, Advances, Advance Interest Amounts, their respective expenses hereunder to the extent such fees and expenses are to be reimbursed or paid from amounts on deposit in the Collection Account pursuant to this Agreement (and to have such amounts paid directly to third party contractors for any invoices approved by the Trustee, the Master Servicer or the Special Servicer, as applicable) and any federal, state or local taxes imposed on any of REMIC I, REMIC II or REMIC III. SECTION 3.07 INVESTMENT OF FUNDS IN THE COLLECTION ACCOUNT, THE REO ACCOUNT, THE LOCK-BOX ACCOUNTS, THE CASH COLLATERAL ACCOUNTS AND THE RESERVE ACCOUNTS. (a) The Master Servicer (or with respect to any REO Account, the Special Servicer), may direct any depository institution maintaining the Collection Account, any Mortgagor Accounts (subject to the second succeeding sentence) and any REO Account (each, for purposes of this Section 3.07, an "INVESTMENT ACCOUNT"), to invest the funds in such Investment Account in one or more Permitted Investments that bear interest or are sold at a discount, and that mature, unless payable on demand, no later than the Business Day preceding the date on which such funds are required to be withdrawn from such Investment Account pursuant to this Agreement, but in no event having a maturity date in excess of 365 days from inception. Any direction by the Master Servicer, the Special Servicer, or subservicer to invest funds on deposit in an Investment Account shall be in writing. In the case of any Escrow Account, Lock-Box Account, Cash Collateral Account or Reserve Account (the "MORTGAGOR ACCOUNTS"), the Master Servicer shall act upon the written request of the related Mortgagor or Manager to the extent the Master Servicer is required to do so under the terms of the respective Mortgage Loan or related documents, PROVIDED that in the absence of appropriate written instructions from the related Mortgagor or Manager meeting the requirements of this Section 3.07, the Master Servicer shall have no obligation to, but will be entitled to, direct the investment of funds in such accounts in Permitted Investments. All such Permitted Investments shall be held to maturity, unless payable on demand. Any investment of funds in an Investment Account shall be made in the name of the Trustee (in its capacity as such) or in the name of a nominee of the Trustee. The Trustee shall have sole control (except with respect to investment direction which shall be in the control of the Master Servicer (or the Special Servicer, with respect to any REO Accounts), - 63 - as an independent contractor to the Trust Fund) over each such investment and any certificate or other instrument evidencing any such investment shall be delivered directly to the Trustee or its agent (which shall initially be the Master Servicer or, with respect to REO Accounts, the Special 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 Master Servicer or the Special Servicer or any losses resulting therefrom, whether from Permitted Investments or otherwise. The Master Servicer shall have no responsibility or liability with respect to the investment directions of the Special Servicer, any Mortgagor or Manager or any losses resulting therefrom, whether from Permitted Investments or otherwise. In the event amounts on deposit in an Investment Account are at any time invested in a Permitted Investment payable on demand, the Master Servicer (or the Special Servicer, as applicable) shall: (x) consistent with any notice required to be given thereunder, demand that payment thereon be made on the last day such Permitted Investment may otherwise mature hereunder in an amount equal to the lesser of (1) all amounts then payable thereunder and (2) the amount required to be withdrawn on such date; and (y) demand payment of all amounts due thereunder promptly upon determination by the Master Servicer (or the Special Servicer as applicable) that such Permitted Investment would not constitute a Permitted Investment in respect of funds thereafter on deposit in the related Investment Account. (b) All income and gain realized from investment of funds deposited in any Investment Account shall be for the benefit of the Master Servicer (except with respect to the investment of funds deposited in (i) any Mortgagor Account, which shall be for the benefit of the related Mortgagor to the extent required under the Mortgage Loan or applicable law, or (ii) any REO Account, which shall be for the benefit of the Special Servicer), and, if held in the Collection Account or REO Account shall be subject to withdrawal by the Master Servicer or the Special Servicer, as applicable, in accordance with Section 3.06 or Section 3.17(b), as applicable. The Master Servicer (or with respect to any REO Account, the Special Servicer) shall deposit from its own funds into the Collection Account or any REO Account, as applicable, the amount of any loss incurred in respect of any such Permitted Investment immediately upon realization of such loss; PROVIDED, HOWEVER, that the Master Servicer or the Special Servicer, as applicable, may reduce the amount of such payment to the extent it forgoes any investment income in such Investment Account otherwise payable to it. The Master Servicer shall also deposit from its own funds in any Mortgagor Account the amount of any loss incurred in respect of Permitted Investments, except to the extent that amounts are invested for the benefit of the Mortgagor under the terms of the Mortgage Loan or applicable law. (c) Except as otherwise expressly provided in this Agreement, if any default occurs in the making of a payment due under any Permitted Investment, or if a default occurs in any other performance required under any Permitted Investment, the Trustee may, and upon the request of Holders of Certificates representing greater than 50% of the Percentage Interests of any Class shall, take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate proceedings. In the event the Trustee takes any such action, the Trust Fund shall pay or reimburse the Trustee for all reasonable out-of-pocket expenses, - 64 - 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 Master Servicer, or Special Servicer, as applicable, may take such action at its own cost and expense. SECTION 3.08 MAINTENANCE OF INSURANCE POLICIES AND ERRORS AND OMISSIONS AND FIDELITY COVERAGE. (a) Consistent with the Servicing Standard, the Master Servicer on behalf of the Trustee, as mortgagee, shall cause the related Mortgagor to maintain, to the extent required by each Mortgage Loan (other than REO Mortgage Loans), and if the Mortgagor does not so maintain, shall itself maintain (subject to the provisions of this Agreement concerning Nonrecoverable Advances) to the extent the Trustee as mortgagee has an insurable interest and to the extent available at commercially reasonable rates, (i) fire and hazard insurance with extended coverage on the related Mortgaged Property in an amount which is at least equal to the lesser of (A) one hundred percent (100%) of the then "full replacement cost" of the improvements and equipment, (excluding foundations, footings and excavation costs), without deduction for physical depreciation, and (B) the outstanding principal balance of the related Mortgage Loan or such greater amount as is necessary to prevent any reduction in such policy by reason of the application of co-insurance and to prevent the Trustee thereunder from being deemed to be a co-insurer and provided such policy shall include a "replacement cost" rider and (ii) such other insurance as is required in the related Mortgage Loan. Consistent with the Special Servicing Standard, the Special Servicer shall maintain, to the extent available at commercially reasonable rates, fire and hazard insurance with extended coverage on each REO Property (subject to the provisions of this Agreement concerning Nonrecoverable Advances) in an amount which is at least equal to one hundred percent (100%) of the then "full replacement cost" of the improvements and equipment (excluding foundations, footings and excavation costs), without deduction for physical depreciation. If the Special Servicer does not maintain the insurance described in the preceding sentence or the required flood insurance described below, the Master Servicer shall, as soon as practicable after receipt of notice of such failure, maintain such insurance, and if the Master Servicer does not maintain such insurance, the insurance required in the first sentence of this Section 3.08(a) or the required flood insurance described below (if the related Mortgagor fails to maintain such insurance), the Trustee shall, as soon as practicable after receipt of notice of such failure, maintain such insurance, PROVIDED that, in each such case, such obligation will be subject to the provisions of this Agreement concerning Nonrecoverable Advances. Consistent with the Special Servicing Standard, the Special Servicer shall maintain, to the extent available at commercially reasonable rates, with respect to each REO Property (i) public liability insurance providing such coverage against such risks as the Special Servicer determines, consistent with the related Mortgage and the Special Servicing Standard, to be in the best interests of the Trust Fund, (ii) insurance providing coverage against 24 months of rent interruptions and (iii) such other insurance as was required pursuant to the terms of the related Mortgage Loan. All insurance required to be maintained in compliance with this Section 3.08(a) shall be from a Qualified Insurer, so long as such requirement is not inconsistent with the applicable Loan Documents. Any amounts collected by the Master Servicer or the Special Servicer under any such policies (other than amounts required to be applied to the restoration or repair of the related Mortgaged Property or amounts to be released to the Mortgagor in accordance with the terms of the related Mortgage) shall be deposited into the Collection Account pursuant to Section 3.05, subject to withdrawal pursuant to Section 3.06. Any cost incurred by the Master Servicer or the Special Servicer in maintaining any such insurance shall - 65 - not, for the purpose of calculating distributions to Certificateholders, be added to the unpaid principal balance of the related Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit. It is understood and agreed that no other additional insurance other than flood insurance or earthquake insurance subject to the conditions set forth below is to be required of any Mortgagor or to be maintained by the Master Servicer other than pursuant to the terms of the related Mortgage and pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance. If the Mortgaged Property (other than an REO Property) is located in a federally designated special flood hazard area, the Master Servicer will use its best efforts to cause the related Mortgagor to maintain, to the extent required by each Mortgage Loan, and if the related Mortgagor does not so maintain, will itself obtain (subject to the provisions of this Agreement concerning Nonrecoverable Advances) flood insurance in respect thereof. Such flood insurance shall be in an amount equal to the lesser of (i) the unpaid principal balance of the related Mortgage Loan and (ii) the maximum amount of such insurance required by the terms of the related Mortgage and as is available for the related property under the national flood insurance program (assuming that the area in which such property is located is participating in such program). If an REO Property (i) is located in a federally designated special flood hazard area or (ii) is related to a Mortgage Loan pursuant to which earthquake insurance was in place at the time of origination and continues to be available at commercially reasonable rates, the Special Servicer will obtain (subject to the provisions of this Agreement concerning Nonrecoverable Advances) flood insurance and/or earthquake insurance in respect thereof providing substantially the same coverage as described in the preceding sentences or, with respect to earthquake insurance, in the amount required by the Mortgage Loan or, if not specified, in-place at origination. In the case of any insurance otherwise required to be maintained pursuant to this Section that is not being so maintained because the Master Servicer or the Special Servicer, as applicable, has determined that it is not available at commercially reasonable rates, the Master Servicer or the Special Servicer, as applicable, shall deliver an Officer's Certificate to the Trustee and each Rating Agency which details the steps that were taken in seeking such insurance and the factors which led to the determination that such insurance was not so available. Costs to the Master Servicer or Special Servicer of maintaining insurance policies pursuant to this Section 3.08 shall be paid by the Master Servicer as a Property Advance and shall be reimbursable to the Master Servicer with interest at the Advance Rate, which reimbursement may be effected under Section 3.06(ii) or (vii). The Master Servicer (or the Special Servicer, with respect to the Specially Serviced Mortgage Loans) agrees to prepare and present, on behalf of itself, the Trustee and the Certificateholders, claims under each related insurance policy maintained pursuant to this Section 3.08(a) in a timely fashion in accordance with the terms of such policy and to take such reasonable steps as are necessary to receive payment or to permit recovery thereunder. All insurance policies required hereunder shall name the Trustee or the Master Servicer or the Special Servicer, on behalf of the Trustee as the mortgagee (or owner with respect to REO Property), as loss payee. (b) (I) If the Master Servicer or the Special Servicer, as applicable, obtains and maintains a blanket insurance policy insuring against fire and hazard losses on all of the Mortgaged Properties (other than REO Properties) as to which the related Mortgagor has not maintained insurance required by the related Mortgage Loan or on all of the REO Properties, - 66 - as the case may be, it shall conclusively be deemed to have satisfied its respective obligations concerning the maintenance of insurance coverage set forth in Section 3.08(a). Any such blanket insurance policy shall be maintained with a Qualified Insurer. A blanket insurance policy may contain a deductible clause, in which case the Master Servicer or the Special Servicer, as applicable, shall, in the event that (i) there shall not have been maintained on the related Mortgaged Property a policy otherwise complying with the provisions of Section 3.08(a), and (ii) there shall have been one or more losses which would have been covered by such a policy had it been maintained, immediately deposit into the Collection Account from its own funds the amount not otherwise payable under the blanket policy because of such deductible clause to the extent that any such deductible exceeds the deductible limitation that pertained to the related Mortgage Loan, or, in the absence of any such deductible limitation, the deductible limitation which is consistent with the Servicing Standard or the Special Servicing Standard, as applicable. In connection with its activities as Master Servicer or Special Servicer hereunder, as applicable, the Master Servicer or the Special Servicer, respectively, agrees to prepare and present, on behalf of itself, the Trustee and Certificateholders, claims under any such blanket policy which it maintains in a timely fashion in accordance with the terms of such policy and to take such reasonable steps as are necessary to receive payment or permit recovery thereunder. (II) If the Master Servicer or the Special Servicer, as applicable, causes any Mortgaged Property or REO Property to be covered by a master force placed insurance policy, such policy shall be issued by a Qualified Insurer and provide no less coverage in scope and amount for such Mortgaged Property or REO Property than the insurance required to be maintained pursuant to Section 3.08(a) in which case the Master Servicer or Special Servicer shall conclusively be deemed to have satisfied its respective obligations to maintain insurance pursuant to Section 3.08(a). Such policy may contain a deductible clause, in which case the Master Servicer or the Special Servicer, as applicable, shall, in the event that (i) there shall not have been maintained on the related Mortgaged Property or REO Property a policy otherwise complying with the provisions of Section 3.08(a), and (ii) there shall have been one or more losses which would have been covered by such a policy had it been maintained, immediately deposit into the Collection Account from its own funds the amount not otherwise payable under such policy because of such deductible to the extent that any such deductible exceeds the deductible limitation that pertained to the related Mortgage Loan, or, in the absence of any such deductible limitation, the deductible limitation which is consistent with the Servicing Standard or the Special Servicing Standard, as applicable. (c) The Master Servicer and the Special Servicer shall each maintain a fidelity bond in the form and amount that would meet the servicing requirements of prudent institutional commercial mortgage lenders and loan servicers. The Master Servicer and the Special Servicer each shall be deemed to have complied with this provision if one of its respective Affiliates has such fidelity bond coverage and, by the terms of such fidelity bond, the coverage afforded thereunder extends to the Master Servicer and the Special Servicer, as applicable. In addition, the Master Servicer and the Special Servicer shall keep in force during the term of this Agreement a policy or policies of insurance covering loss occasioned by the errors and omissions of its officers and employees in connection with its obligations to service the Mortgage Loans hereunder in the form and amount that would meet the servicing requirements of prudent institutional commercial mortgage lenders and - 67 - loan servicers. The Master Servicer shall cause each and every subservicer 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 Master Servicer pursuant to this Section 3.08(c). All fidelity bonds and policies of errors and omissions insurance obtained under this Section 3.08(c) shall be issued by a Qualified Insurer. SECTION 3.09 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 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 Master Servicer or Special Servicer, as applicable, on behalf of the Trust Fund shall enforce such due-on-sale clause and in connection therewith shall (a) accelerate payments thereon or (b) withhold its consent to such an assumption to the extent permitted under the terms of the related Mortgage Loan only if (x) such provision is exercisable under applicable law or such exercise is not reasonably likely to result in meritorious legal action by the Mortgagor and (y) the Master Servicer or Special Servicer, as applicable, determines, in accordance with the Servicing Standard or the Special Servicing Standard, as applicable, that such enforcement or the withholding of such consent would be likely to result in a greater recovery, on a present value basis (discounting at the related Mortgage Interest Rate) than would a waiver of such clause. If the Master Servicer or Special Servicer, as applicable, determines that such enforcement or the withholding of such consent would not be likely to result in a greater recovery, the Master Servicer or Special Servicer, as applicable, is authorized to take or enter into an assumption agreement from or with the Person to whom the related Mortgaged Property has been or is about to be conveyed, and to release the original Mortgagor from liability upon the Mortgage Loan and substitute the new Mortgagor as obligor thereon PROVIDED that (A) the credit status of the prospective new Mortgagor is in compliance with the Master Servicer's or Special Servicer's regular commercial mortgage origination or servicing standards and criteria (as evidenced in writing by the Master Servicer or Special Servicer) and the terms of the related Mortgage and (B) for individual Mortgage Loans, groups of Mortgage Loans to a single Mortgagor or groups of cross-collateralized, cross-defaulted Mortgage Loans, in any such case with an aggregate unpaid principal balance in excess of ___% of the aggregate principal balance of the Mortgage Loans as of the Closing Date, the Master Servicer or the Special Servicer, as applicable, has received written confirmation from the Rating Agencies that such assumption or substitution would not, in and of itself, cause a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates. The Master Servicer or Special Servicer shall notify the Trustee that any such assumption or substitution agreement has been completed by forwarding to the Trustee the original copy of such agreement, which copies shall be added to the related Mortgage Loan File and shall, for all purposes, be - 68 - considered a part of such Mortgage Loan File to the same extent as all other documents and instruments constituting a part thereof. (b) If any Mortgage Loan contains a provision in the nature of a "due-on-encumbrance" clause, which by its terms: (i) provides that such Mortgage Loan shall (or may at the mortgagee's option) become due and payable upon the creation of any lien or other encumbrance on the related Mortgaged Property, or (ii) requires the consent of the related mortgagee to the creation of any such lien or other encumbrance on the related Mortgaged Property, then, for so long as such Mortgage Loan is included in the Trust Fund, the Master Servicer or the Special Servicer, as applicable, on behalf of the Trust Fund, shall (x) enforce such due-on-encumbrance clause and accelerate the payments thereon or (y) consent to the creation of any such lien or other encumbrance only if the Master Servicer or Special Servicer, as applicable, (1) determines, in accordance with the Servicing Standard or Special Servicing Standard, as applicable, that such consent would be in the best interests of the Trust Fund and (2) receives prior written confirmation from the Rating Agencies stating that such consent would not, in and of itself, cause a downgrade, qualification or withdrawal of any of the then current ratings assigned to the Certificates. (c) Nothing in this Section 3.09 shall constitute a waiver of the Trustee's right, as the mortgagee of record, to receive notice of any assumption of a Mortgage Loan, any sale or other transfer of the related Mortgaged Property or the creation of any lien or other encumbrance with respect to such Mortgaged Property. (d) In connection with the taking of, or the failure to take, any action pursuant to this Section 3.09, neither the Master Servicer nor the Special Servicer shall agree to modify, waive or amend, and no assumption or substitution agreement entered into pursuant to Section 3.09(a) shall contain any terms that are different from, any term of any Mortgage Loan or the related Mortgage Note, other than pursuant to Section 3.29. SECTION 3.10 APPRAISALS; REALIZATION UPON DEFAULTED MORTGAGE LOANS. (a) Contemporaneously with the earliest of (i) the effective date of any (A) modification of a Mortgage Interest Rate, principal balance or amortization terms of any Mortgage Loan, or any other term of a Mortgage Loan, (B) extension of the Maturity Date of a Mortgage Loan as described below in Section 3.29(c), or (C) consent to the release of any Mortgaged Property from the lien of the related Mortgage other than pursuant to the terms of the related Mortgage Loan, (ii) the occurrence of any Collateral Value Adjustment Event, (iii) a default in the payment of a Balloon Payment, or (iv) the date on which the Special Servicer, consistent with the Special Servicing Standard determines that an Updated Appraisal should be obtained, the Special Servicer shall obtain an Updated Appraisal; PROVIDED, HOWEVER, that the Special Servicer shall not be required to obtain an Updated Appraisal pursuant to clauses (i) through (iii) above with respect to any Mortgaged - 69 - Property for which there exists an appraisal which is less than twelve months old; PROVIDED, FURTHER, that if either the Special Servicer or an Affiliate thereof owns more than 51% of the Most Subordinate Class of Certificates then outstanding, then the Trustee shall obtain such Updated Appraisal. Upon the occurrence of any event giving rise to a subsequent Collateral Value Adjustment (including the Delinquency referred to in the definition of Collateral Value Adjustment Event) more than twelve months after an appraisal was obtained with respect to a previous Collateral Value Adjustment, the Special Servicer will order a new Updated Appraisal as described above, within 30 days of the occurrence of any such event giving rise to a subsequent Collateral Value Adjustment and will adjust the amount of the Collateral Value Adjustment in accordance therewith. The Special Servicer shall obtain letter updates to each Updated Appraisal annually and prior to the Special Servicer granting extensions beyond one year or any subsequent extension after granting a one year extension with respect to the same Mortgage Loan; for so long as any Mortgage Loan for which an Updated Appraisal has been obtained is included in the Trust Fund, the Special Servicer shall obtain a new Updated Appraisal with respect to an Updated Appraisal which is more than three years old. (b) Upon the occurrence of a material default under a Specially Serviced Mortgage Loan, except as otherwise specifically provided in Section 3.09(a) and (b), the Special Servicer may, consistent with the Special Servicing Standard, accelerate such Specially Serviced Mortgage Loan and elect to sell such Specially Serviced Mortgage Loan or commence a foreclosure or other acquisition with respect to the related Mortgaged Property or Properties, PROVIDED, that, the Special Servicer determines that such sale or acceleration and foreclosure are more likely to produce a greater recovery to Certificateholders on a present value basis (discounting at the related Mortgage Interest Rate) than would a waiver of such default or an extension or modification in accordance with the provisions of Section 3.29 hereof. In connection with any sale or foreclosure or other acquisition, the Master Servicer shall pay the costs and expenses in any such proceedings as an Advance unless the Master Servicer determines, in its good faith judgment, that such Advance would constitute a Nonrecoverable Advance. The Master 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 Sections 3.06(ii), (iii) and (vii). If the Master Servicer determines that any such Advance would be a Nonrecoverable Advance, the Special Servicer may, consistent with the Special Servicing Standard, determine to pay any such costs it deems necessary to minimize the Realized Losses related to such Mortgage Loan, and such costs shall be an expense of the Trust Fund. (c) If the Special Servicer elects to proceed with a non-judicial foreclosure in accordance with the laws of the state where the Mortgaged Property is located, the Special Servicer shall not be required to pursue a deficiency judgment against the related Mortgagor or any other liable party if the laws of the state do not permit such a deficiency judgment after a non-judicial foreclosure or if the Special Servicer determines, in its best judgment, that the likely recovery if a deficiency judgment is obtained will not be sufficient to warrant the cost, time, expense and/or exposure of pursuing the deficiency judgment and such determination is evidenced by an Officers' Certificate delivered to the Trustee. (d) In the event that title to any Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale shall be issued to the Trustee, or to its nominee (which shall not include the Special Servicer) or a separate trustee or co-trustee on behalf of the - 70 - Trustee as holder of the REMIC I Regular Interests, REMIC II Regular Interests and Certificateholders. Notwithstanding any such acquisition of title and cancellation of the related Mortgage Loan, such Mortgage Loan shall (except for purposes of Section 9.01) be considered to be an REO Loan held in the Trust Fund until such time as the related REO Property shall be sold by the Trust Fund and shall be reduced only by collections net of expenses. Consistent with the foregoing, for purposes of all calculations hereunder, so long as such REO 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 Mortgage Note shall have been discharged, such Mortgage 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) Subject to Section 1.02(b), Net REO Proceeds received in any month shall be applied to amounts that would have been payable under the related Mortgage Note in accordance with the terms of such Mortgage 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; SECOND in respect of the delinquent principal installments that remained unpaid on such date; and THEREAFTER, Net REO Proceeds received in any month shall be applied to the payment of installments of principal and accrued interest on such Mortgage Loan deemed to be due and payable in accordance with the terms of such Mortgage Note and such amortization schedule until such principal has been paid in full and then to other amounts due under such Mortgage Loan. If such Net REO Proceeds exceed the Monthly Payment then payable, the excess shall be treated as a Principal Prepayment received in respect of such Mortgage Loan. (e) Notwithstanding any provision herein to the contrary, the Special Servicer shall not acquire for the benefit of the Trust Fund any personal property pursuant to this Section 3.10 unless either: (i) such personal property is incident to real property (within the meaning of Section 856(e)(1) of the Code) so acquired by the Special Servicer for the benefit of the Trust Fund; or (ii) the Special Servicer shall have requested and received an Opinion of Counsel (which opinion shall be an expense of the Trust Fund) to the effect that the holding of such personal property by REMIC I will not cause the imposition of a tax on REMIC I, REMIC II or REMIC III under the REMIC Provisions or cause REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC at any time that any Certificate is outstanding. (f) Notwithstanding any provision to the contrary in this Agreement, the Special Servicer shall not, on behalf of the Trust Fund, obtain title to any direct or indirect partnership interest or other equity interest in any Mortgagor pledged pursuant to any pledge agreement unless the Special Servicer shall have requested and received an Opinion of Counsel (which opinion shall be an expense of the Trust Fund) to the effect that the holding of such partnership interest or other equity interest by the Trust Fund will not cause the imposition of a tax on REMIC I, REMIC II or - 71 - REMIC III under the REMIC Provisions or cause REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC at any time that any Certificate is outstanding. (g) Notwithstanding any provision to the contrary contained in this Agreement, the Special Servicer shall not, on behalf of the Trust Fund, obtain title to a Mortgaged Property as a result of or in lieu of foreclosure or otherwise, obtain title to any direct or indirect partnership interest in any Mortgagor pledged pursuant to a pledge agreement and thereby be the beneficial owner of a Mortgaged Property, or 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 Special Servicing Standard, based on an updated environmental assessment report prepared by an Independent Person who regularly conducts environmental audits, that: (i) 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 (ii) there are no circumstances present at such Mortgaged Property relating to the use, management or disposal of any Hazardous Materials for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any currently effective federal, state or local law or regulation, or that, if any such Hazardous Materials are present for which such action could be required, after consultation with an environmental consultant, it would be in the best economic interest of the Trust Fund to take such actions with respect to the affected Mortgaged Property. In the event that the environmental assessment first obtained by the Special Servicer with respect to a Mortgaged Property indicates that such Mortgaged Property may not be in compliance with applicable environmental laws or that Hazardous Materials may be present but does not definitively establish such fact, the Special Servicer shall cause such further environmental tests to be conducted by an Independent Person who regularly conducts such tests as the Special Servicer shall deem prudent to protect the interests of Certificateholders. Any such tests shall be deemed part of the environmental assessment obtained by the Special Servicer for purposes of this Section 3.10. (h) The environmental assessment contemplated by Section 3.10(g) shall be prepared within three months of the determination that such assessment is required by any Independent Person who regularly conducts environmental audits for purchasers of commercial property where the Mortgaged Property is located, as determined by the Special Servicer in a manner consistent with the Special Servicing Standard. The Master Servicer shall advance the cost of preparation of such environmental assessments unless the Master Servicer determines, in its good faith judgment, that such Advance would be a Nonrecoverable Advance. The Master Servicer shall be entitled to reimbursement of Advances (with interest at the Advance Rate) made pursuant to the preceding sentence in the manner set forth in Section 3.06. If the Master Servicer determines that any such - 72 - Advance would be a Nonrecoverable Advance, the Special Servicer may, consistent with the Special Servicing Standard, determine to pay such costs of preparation as it deems necessary to minimize the Realized Losses related to such Mortgage Loan, and such costs shall be an expense of the Trust Fund. (i) If the Special Servicer determines pursuant to Section 3.10(g)(i) that a Mortgaged Property is not in compliance with applicable environmental laws but that it is in the best economic interest of the Trust Fund to take such actions as are necessary to bring such Mortgaged Property in compliance therewith, or if the Special Servicer determines pursuant to Section 3.10(g)(ii) that the circumstances referred to therein relating to Hazardous Materials are present but that it is in the best economic interest of the Trust Fund to take such action with respect to the investigation, testing, monitoring, containment, clean-up or remediation of Hazardous Materials affecting such Mortgaged Property as is required by law or regulation, the Special Servicer shall take such action as it deems to be in the best economic interest of the Trust Fund, but only if the Trustee has mailed notice to the Holders of the Certificates of such proposed action, which notice shall be prepared by the Special Servicer, and only if the Trustee does not receive, within 30 days of such notification, instructions from the Holders of greater than 50% of the aggregate Voting Rights of such Classes directing the Special Servicer not to take such action. Notwithstanding the foregoing, if the Special Servicer reasonably determines that it is likely that within such 30-day period irreparable environmental harm to such Mortgage Property would result from the presence of such Hazardous Materials and provides a prior written statement to the Trustee setting forth the basis for such determination, then the Special Servicer may take such action to remedy such condition as may be consistent with the Special Servicing Standard. None of the Trustee, the Master Servicer or the Special Servicer shall be obligated to take any action or not take any action pursuant to this Section 3.10(i) at the direction of the Certificateholders unless the Certificateholders agree to indemnify the Trustee, the Master Servicer and the Special Servicer with respect to such action or inaction. (j) The Special Servicer shall report to the IRS and to the related Mortgagor, in the manner required by applicable law, the information required to be reported regarding any Mortgaged Property which is abandoned or foreclosed or regarding any cancellation of indebtedness with respect to any Mortgage Loan. The Special Servicer shall deliver a copy of any such report to the Trustee and the Master Servicer. (k) The costs of any Updated Appraisal obtained pursuant to this Section 3.10 shall be paid by the Master Servicer as an Advance and shall be reimbursable from the Collection Account (or from the Cash Collateral Account to the extent Advances are otherwise reimbursable therefrom pursuant to this Section 3.10). SECTION 3.11 TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE LOAN FILES. Upon the payment in full of any Mortgage Loan, or the receipt by the Master Servicer of a notification that payment in full has been escrowed in a manner customary for such purposes, the Master Servicer shall immediately notify the Trustee or the Custodian by a certification (which certification shall include a statement to the effect that all amounts received or to be received in connection with such payment which are required to be deposited in the Collection Account pursuant to Section 3.05 have been or will be so deposited) of a Servicing Officer and shall request delivery - 73 - to it of the Mortgage Loan 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 Master 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 Loan File (or any portion thereof) designated in such Request for Release to the Master Servicer or Special Servicer, as applicable. Upon return of the foregoing to the Custodian, or in the event of a liquidation or conversion of the Mortgage Loan into an REO Property, receipt by the Trustee of a certificate of a Servicing Officer stating that such Mortgage Loan was liquidated and that all amounts received or to be received in connection with such liquidation which are required to be deposited into the Collection Account or Certificate Account have been so deposited, or that such Mortgage Loan has become an REO Property, the Custodian shall deliver a copy of the Request for Release to the Master Servicer or Special Servicer, as applicable. Upon written certification of a Servicing Officer, the Trustee shall execute and deliver to the Special Servicer any court pleadings, requests for trustee's sale or other documents prepared by the Special Servicer, its agents or attorneys, necessary to the foreclosure or trustee's sale in respect of a Mortgaged Property or to any legal action brought to obtain judgment against any Mortgagor on the Mortgage Note or Mortgage or to obtain a deficiency judgment, or to enforce any other remedies or rights provided by the Mortgage Note or Mortgage or otherwise available at law or in equity. Each such certification shall include a request that such pleadings or documents be executed by the Trustee and a statement as to the reason such documents or pleadings are required, and that the execution and delivery thereof by the Trustee will not invalidate or otherwise affect the lien of the Mortgage, except for the termination of such a lien upon completion of the foreclosure or trustee's sale. SECTION 3.12 MASTER SERVICING FEES, TRUSTEE FEES AND SPECIAL SERVICING COMPENSATION. (a) As compensation for its activities hereunder, the Master Servicer shall be entitled with respect to each Mortgage Loan to the Servicing Fee, which shall be payable from amounts on deposit in the Collection Account as set forth in Section 3.06(iv). The Master 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 Master Servicer's responsibilities and obligations under this Agreement. In addition, the Master Servicer shall be entitled to receive, as additional Servicing Compensation, to the extent permitted by applicable law and the related Mortgage Loans, any late payment charges (to the extent not allocable to pay Advance Interest Amounts with respect to P&I Advances made in respect of the related Mortgage Loan), Assumption Fees, loan service transaction fees, loan modification fees, extension fees, beneficiary statement charges, demand charges, amounts collected for checks returned for insufficient funds, and any similar items (but not including any Prepayment Premiums) in each case to the extent received, or to the extent actually paid by a Mortgagor, with respect to a 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 3.05; the Master Servicer shall also be entitled pursuant to, and to the extent provided in, Sections 3.06(iv) and 3.07(b) to withdraw from the Collection Account and to receive from any Mortgagor Accounts (to the extent not payable to the - 74 - related Mortgagor under the Mortgage Loan or applicable law), any interest or other income earned on deposits therein; the Master Servicer shall also be entitled to receive (a) Prepayment Interest Excesses (as set forth in the following paragraph), and (b) any Default Interest actually collected on the Mortgage Loans, but only to the extent that (1) such Default Interest is allocable to the period (not to exceed 60 days) when the related Mortgage Loan did not constitute a Specially Serviced Mortgage Loan or REO Property and such Mortgage Loan does not become a Specially Serviced Mortgage Loan and (2) such Default Interest is not allocable to pay any portion of interest accrued on P&I Advances made in respect of the related Mortgage Loan. Notwithstanding anything set forth in this Agreement, the Master Servicer's compensation for the period ending on a Distribution Date shall be reduced (but not below zero) by an amount equal to the Servicer Prepayment Interest Shortfall. The Master Servicer shall be entitled to retain on any Distribution Date any excess of all Prepayment Interest Excesses for such Distribution Date over all Prepayment Interest Shortfalls for such Distribution Date. As compensation for its activities hereunder on each Distribution Date, the Trustee shall be entitled with respect to each Mortgage Loan to the Trustee Fee, which shall be payable from amounts on deposit in the Collection Account as set forth in Section 3.06(v). The Trustee shall pay the routine fees and expenses of the Certificate Registrar, the Paying Agent, the Custodian and the Authenticating Agent. The Trustee's rights to the Trustee Fee may not be transferred in whole or in part except in connection with the transfer of all of the Trustee's responsibilities and obligations under this Agreement. Except as otherwise provided herein, the Master Servicer shall pay all expenses incurred by it in connection with its servicing activities hereunder, including all fees of any subservicers retained by it. Except as otherwise provided herein, the Trustee shall pay all expenses incurred by it in connection with its activities hereunder. (b) As compensation for its activities hereunder, the Special Servicer shall be entitled with respect to each Specially Serviced Mortgage Loan to the Special Servicing Fee, which shall be payable only from amounts received in respect of each Specially Serviced Mortgage Loan, or following a liquidation in which Net Liquidation Proceeds are insufficient to pay accrued Special Servicing Fees, from funds on deposit in the Collection Account as set forth in Section 3.06(iv). In addition, the Special Servicer shall be entitled to, with respect to any Specially Serviced Mortgage Loan (other than an extended Balloon Loan) that is liquidated or restored to a performing status for at least three consecutive months, a Principal Recovery Fee, which fee shall be payable from amounts on deposit in the Collection Account actually received in respect of such Specially Serviced Mortgage Loan. The Special Servicer's rights to the Special Servicing Fee and Principal Recovery Fee may not be transferred in whole or in part except in connection with the transfer of all of the Special Servicer's responsibilities and obligations under this Agreement. In addition, the Special Servicer shall be entitled to receive, as additional servicing compensation, to the extent permitted by applicable law and the related Loan Documents, any Assumption Fees, extension fees and modification fees received on or with respect to any Specially Serviced Mortgage Loan. The Special Servicer shall also be entitled to late payment charges and Default Interest paid by the Mortgagors on Specially Serviced Mortgaged Loans, but only to the extent such amounts are not needed to pay interest on P&I Advances in respect of the related Mortgage Loan. - 75 - Except as otherwise provided herein, the Special Servicer shall pay all expenses incurred by it in connection with its servicing activities hereunder. (c) The Master Servicer, the Special Servicer, the Fiscal Agent and the Trustee shall be entitled to reimbursement from the Trust Fund for the costs and expenses incurred by them in the performance of their duties under this Agreement which are "unanticipated expenses incurred by the REMIC" within the meaning of Treasury Regulations Section 1.860G-1(b)(3)(iii). Such expenses shall include, by way of example and not by way of limitation, environmental assessments, Updated Appraisals and appraisals in connection with foreclosure, the fees and expenses of any administrative or judicial proceeding and expenses expressly identified as reimbursable in Section 3.06(vii). (d) No provision of this Agreement or of the Certificates shall require the Master Servicer, the Special Servicer, the Trustee or the Fiscal Agent to expend or risk their own funds that are reimbursable pursuant to this Agreement or otherwise incur any financial liability in the performance of any of their duties hereunder or thereunder that is subject to reimbursement pursuant to the Agreement, or in the exercise of any of their rights or powers, if, in the good faith business judgment of the Master Servicer, Special Servicer, Trustee or Fiscal Agent, as the case may be, repayment of such funds intended to be so reimbursed would not be ultimately recoverable from late payments, Net Insurance Proceeds, Net Liquidation Proceeds and other collections on or in respect of the Mortgage Loans, or from adequate indemnity from other assets comprising the Trust Fund against such risk or liability. If the Master Servicer, the Special Servicer or the Trustee receives a request or inquiry from a Mortgagor, any Certificateholder or any other Person the response to which would, in the Master Servicer's or the Trustee's good faith business judgment require the assistance of Independent legal counsel or other consultant to the Master Servicer, the Special Servicer or the Trustee, the cost of which would not be an expense of the Trust Fund hereunder, then the Master Servicer, the Special Servicer or the Trustee, as the case may be, shall not be required to take any action in response to such request or inquiry unless the Mortgagor or such Certificateholder or such other Person, as applicable, makes arrangements for the payment of the Master Servicer's, the Special Servicer's or the Trustee's expenses associated with such counsel (including, without limitation, posting an advance payment for such expenses) satisfactory to the Master Servicer, the Special Servicer or the Trustee, as the case may be, in its sole discretion. Unless such arrangements have been made, the Master 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 Master Servicer shall deliver to the Trustee, the Fiscal Agent and the Special Servicer, no later than 1:00 p.m. Central time on the Business Day prior to each Remittance Date prior to each Distribution Date, the Servicer Remittance Report with respect to the related Distribution Date (which shall include, without limitation, the Available Distribution Amount for such related Collection Period) including a written statement of anticipated P&I Advances for the related Distribution Date, PROVIDED, that preliminary reports containing information regarding the activity occurring in the related Collection Period shall be delivered on or before the third Business Day preceding the related Distribution Date. The Master Servicer's responsibilities under this - 76 - Section 3.13(a) with respect to REO Loans shall be subject to the satisfaction of the Special Servicer's obligations under Section 3.26. (b) For so long as the Master Servicer makes deposits into and withdrawals from the Collection Account, not later than fifteen days after each Distribution Date, the Master Servicer shall forward to the Trustee a statement prepared by the Master Servicer setting forth the status of the Collection Account as of the close of business on the last Business Day of the related Collection Period and showing the aggregate amount of deposits into and withdrawals from the Collection Account of each category of deposit specified in Section 3.05 and each category of withdrawal specified in Section 3.06 for the related Collection Period. The Trustee and its agents and attorneys may at any time during normal business hours, upon reasonable notice, inspect and copy the books, records and accounts of the Master Servicer solely relating to the Mortgage Loans and the performance of its duties hereunder. (c) The Trustee shall be entitled to rely conclusively on and shall not be responsible for the content or accuracy of any information provided to it by the Master Servicer or the Special Servicer pursuant to this Agreement. SECTION 3.14 ANNUAL STATEMENT AS TO COMPLIANCE. The Master Servicer and the Special Servicer (the "REPORTING PERSON") each shall deliver to the Trustee, the Depositor and to the Rating Agencies on or before _________ of each year, beginning with ______________, an Officer's Certificate stating, as to each signatory thereof, (i) that a review of the activities of the reporting person during the preceding calendar year (or such shorter period from the Closing Date to the end of the related calendar year) and of its performance under this Agreement has been made under such officer's supervision, (ii) that, to the best of such officer's knowledge, based on such review, the reporting person has fulfilled all of its obligations under this Agreement throughout such year (or such shorter period), or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officer, the nature and status thereof and what action it proposes to take with respect thereto, (iii) that, to the best of such officer's knowledge, each related subservicer has fulfilled its obligations under its subservicing agreement in all material respects, or, if there has been a material default in the fulfillment of such obligations, specifying each such default known to such officer and the nature and status thereof, and (iv) whether it has received any notice regarding qualification, or challenging the status, of REMIC I, REMIC II or REMIC III 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 _________ of each year, beginning with ______________, the Master Servicer and the Special Servicer (the "REPORTING PERSON") each at the reporting person's expense shall cause a firm of nationally recognized Independent public accountants (who may also render other services to the reporting person) which is a member of the American Institute of Certified Public Accountants to furnish a statement (an "ACCOUNTANT'S STATEMENT") to the Trustee, the Depositor and to the Rating Agencies, to the effect that (i) it has obtained from the Master Servicer or the Special Servicer, as the case may be, a letter of representation regarding certain matters from the management of the - 77 - Master Servicer or the Special Servicer, as the case may be, which includes an assertion that the Master Servicer or the Special Servicer, as the case may be, has maintained an effective internal control system with respect to the servicing of the Mortgage Loans and 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 the Special Servicer's, as the case may be, servicing of commercial and multifamily mortgage loans during the most recently completed calendar year and (ii) on the basis of an examination conducted by such firm substantially in accordance with generally accepted auditing standards established by the American Institute of Certified Public Accountants, such assertion is fairly stated in all material respects, subject to such exceptions and other qualifications that, in the opinion of such firm, such standards require it to report. In rendering its report such firm may rely, as to the matters relating to the direct servicing of commercial and multifamily mortgage loans by subservicers, upon comparable reports of firms of independent certified public accountants rendered on the basis of examinations conducted in accordance with the same standards (rendered within one year of such statement) with respect to those subservicers. Each reporting person shall obtain from the related accountants, or shall prepare, an electronic version of each Accountant's Statement and provide such electronic version to the Trustee for filing in accordance with the procedures set forth in Section 3.22 hereof. With respect to any electronic version of an Accountant's Statement prepared by the reporting person, the reporting person shall receive written confirmation from the related accountants SECTION 3.16 ACCESS TO CERTAIN DOCUMENTATION. The Master Servicer and Special Servicer shall provide to any Certificateholders that are federally insured financial institutions, the Federal Reserve Board, the FDIC and the Office of Thrift Supervision 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, Office of Thrift Supervision 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 Master Servicer and Special Servicer. Nothing in this Section 3.16 shall detract from the obligation of the Master Servicer and Special Servicer to observe any applicable law prohibiting disclosure of information with respect to the Mortgagors, and the failure of the Master Servicer (and the subservicer) and Special Servicer to provide access as provided in this Section 3.16 as a result of such obligation shall not constitute a breach of this Section 3.16. SECTION 3.17 TITLE AND MANAGEMENT OF REO PROPERTIES AND REO ACCOUNT PROPERTIES. (a) In the event that title to any Mortgaged Property is acquired for the benefit of Certificateholders in foreclosure, by deed in lieu of foreclosure or upon abandonment or reclamation from bankruptcy, the deed or certificate of sale shall be taken in the name of the Trustee, or its nominee (which shall not include the Master Servicer), or a separate trustee or co-trustee, on behalf of the Trust Fund. The Special Servicer, on behalf of the Trust Fund, shall dispose of any REO Property within two years after the Trust Fund acquires ownership of such REO Property for - 78 - purposes of Section 860G(a)(8) of the Code, unless (i) the Special Servicer on behalf of REMIC I has applied for an extension of such two-year period pursuant to Sections 856(e)(3) and 860G(a)(8)(A) of the Code, in which case the Special Servicer shall sell such REO Property within the applicable extension period or (ii) the Special Servicer seeks and subsequently receives an Opinion of Counsel (which opinion shall be an expense of the Trust Fund), addressed to the Special Servicer and Trustee, to the effect that the holding by the Trust Fund of such REO Property for an additional specified period will not cause such REO Property to fail to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code (determined without regard to the exception applicable for purposes of Section 860D(a) of the Code) at any time that any Certificate is outstanding, in which event such two-year period shall be extended by such additional specified period subject to any conditions set forth in such Opinion of Counsel. The Special Servicer, on behalf of the Trust Fund, shall dispose of any REO Property held by the Trust Fund prior to the last day of such period (taking into account extensions) by which such REO Property is required to be disposed of pursuant to the provisions of the immediately preceding sentence in a manner provided under Section 3.18 hereof. The Special Servicer shall manage, conserve, protect and operate each REO Property for the Certificateholders solely for the purpose of its prompt disposition and sale in a manner which does not cause such REO Property to fail to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code (determined without regard to the exception applicable for purposes of Section 860D(a)). (b) The Special Servicer shall have full power and authority, subject only to the specific requirements and prohibitions of this Agreement, to do any and all things in connection with any REO Property as are consistent with the manner in which the Special Servicer manages and operates similar property owned or managed by the Special Servicer or any of its Affiliates, all on such terms and for such period as the Special Servicer deems to be in the best interests of Certificateholders, and, in connection therewith, the Special Servicer shall agree to the payment of management fees that are consistent with general market standards. The Special Servicer shall segregate and hold all revenues received by it with respect to any REO Property separate and apart from its own funds and general assets and shall establish and maintain with respect to any REO Property a segregated custodial account (each, an "REO ACCOUNT"), each of which shall be an Eligible Account and shall be entitled "_______________________ in trust for __________________________, as Trustee, in trust for Holders of ICIFC Secured Assets Corp., Mortgage Pass-Through Certificates, Series 199__-__, REO Account." The Special Servicer shall be entitled to withdraw for its account any interest or investment income earned on funds deposited in an REO Account to the extent provided in Section 3.07(b). The Special Servicer shall deposit or cause to be deposited in the REO Account within one Business Day after receipt all revenues received by it with respect to any REO Property (other than Liquidation Proceeds), and shall withdraw therefrom funds necessary for the proper operation, management and maintenance of such REO Property and for other Property Protection Expenses with respect to such REO Property, including: (i) all insurance premiums due and payable in respect of any REO Property; (ii) all real estate taxes and assessments in respect of any REO Property that may result in the imposition of a lien thereon; - 79 - (iii) all costs and expenses reasonable and necessary to protect, maintain, manage, operate, repair and restore any REO Property; and (iv) any taxes imposed on REMIC I, REMIC II or REMIC III in respect of net income from foreclosure property in accordance with Section 4.05. To the extent that such REO Proceeds are insufficient for the purposes set forth in clauses (i) through (iii) above, the Special Servicer shall provide written notice of such shortfall to the Master Servicer at least five Business Days prior to the date that such amounts are due (or, in the event that the Special Servicer determines, in accordance with the Special Servicing Standard, that an emergency exists requiring immediate payment of any amount described in clauses (i) - (iii), such notice shall be provided at least two Business Days prior to such date). If such notice is provided in accordance with the preceding sentence, the Master Servicer shall advance the amount of such shortfall unless the Master Servicer determines, in its good faith judgment, that such Advance would be a Nonrecoverable Advance. If the Master Servicer fails to make any such Advance in violation of the immediately preceding sentence, the Trustee shall make such Advance; and if the Trustee fails to make any such Advance, the Fiscal Agent shall make such Advance, unless in either case, the Trustee or the Fiscal Agent determines that such Advance would be a Nonrecoverable Advance. The Trustee and the Fiscal Agent shall be entitled to rely, conclusively, on any determination by the Master Servicer that an Advance, if made, would be a Nonrecoverable Advance. The Trustee and the Fiscal Agent, in determining whether or not a proposed Advance would be a Nonrecoverable Advance, shall be subject to the standards applicable to the Master Servicer hereunder. The Master Servicer, the Trustee or the Fiscal Agent, as applicable, shall be entitled to reimbursement of such Advances (with interest at the Advance Rate) made pursuant to the preceding sentence, to the extent set forth in Section 3.06. The Special Servicer shall withdraw from each REO Account and remit to the Master Servicer for deposit into the Collection Account on a monthly basis three Business Days prior to the related Remittance Date the Net REO Proceeds received or collected from each REO Property, except that in determining the amount of such Net REO Proceeds, the Special Servicer may retain in each REO Account reasonable reserves for repairs, replacements and necessary capital improvements and other related expenses. Notwithstanding the foregoing, the Special Servicer shall not: (i) permit the Trust Fund to enter into, renew or extend any New Lease, if the New Lease by its terms will give rise to any income that does not constitute Rents from Real Property; (ii) permit any amount to be received or accrued under any New Lease, other than amounts that will constitute Rents from Real Property; (iii) authorize or permit any construction on any REO Property, other than the repair or maintenance thereof or the completion of a building or other improvement thereon, and then only if more than ten percent of the construction of such building or other improvement was completed before default on the related Mortgage Loan became imminent, all within the meaning of Section 856(e)(4)(B) of the Code; or - 80 - (iv) Directly Operate or allow any Person to Directly Operate any REO Property on any date more than 90 days after its date of acquisition by the Trust Fund, unless such Person is an Independent Contractor; unless, in any such case, the Special Servicer has requested and received an Opinion of Counsel addressed to the Special Servicer and the Trustee (which opinion shall be an expense of the Trust Fund) to the effect that such action will not cause such REO Property to fail to qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code (determined without regard to the exception applicable for purposes of Section 860D(a) of the Code) at any time that it is held by the Trust Fund, in which case the Special Servicer may take such actions as are specified in such Opinion of Counsel. The Special Servicer shall be required to contract with an Independent Contractor, the fees and expenses of which shall be an expense of the Trust Fund and payable out of REO Proceeds, for the operation and management of any REO Property, within 90 days of the Trust Fund's acquisition thereof (unless the Special Servicer shall have provided the Trustee with an Opinion of Counsel that the operation and management of any REO Property other than through an Independent Contractor shall not cause such REO Property to fail to qualify as "foreclosure property" within the meaning of Code Section 860G(a)(8)) (which opinion shall be an expense of the Trust Fund), PROVIDED that: (i) the terms and conditions of any such contract shall be reasonable and customary for the area and type of property and shall not be inconsistent herewith; (ii) any such contract shall require, or shall be administered to require, that the Independent Contractor pay all costs and expenses incurred in connection with the operation and management of such REO Property, including those listed above, and remit all related revenues (net of such costs and expenses) to the Special Servicer as soon as practicable, but in no event later than thirty days following the receipt thereof by such Independent Contractor; (iii) none of the provisions of this Section 3.17(b) relating to any such contract or to actions taken through any such Independent Contractor shall be deemed to relieve the Special Servicer of any of its duties and obligations to the Trust Fund or the Trustee on behalf of the Certificateholders with respect to the operation and management of any such REO Property; and (iv) the Special Servicer shall be obligated with respect thereto to the same extent as if it alone were performing all duties and obligations in connection with the operation and management of such REO Property. The Special Servicer shall be entitled to enter into any agreement with any Independent Contractor performing services for it related to its duties and obligations hereunder for indemnification of the Special Servicer by such Independent Contractor, and nothing in this Agreement shall be deemed to limit or modify such indemnification. - 81 - (c) The Special Servicer shall notify the Depositor, the Master Servicer and the Trustee hereto of the results of each appraisal obtained pursuant to Section 3.10. (d) When and as necessary, the Special Servicer shall send to the Trustee a statement prepared by the Special Servicer setting forth the amount of net income or net loss, as determined for federal income tax purposes, resulting from the operation and management of a trade or business on, the furnishing or rendering of a non-customary service to the tenants of, or the receipt of any other amount not constituting Rents from Real Property in respect of, any REO Property in accordance with Sections 3.17(a) and 3.17(b). SECTION 3.18 SALE OF SPECIALLY SERVICED MORTGAGE LOANS AND REO PROPERTIES. (a) With respect to any Specially Serviced Mortgage Loan or REO Property which the Special Servicer has determined to sell in accordance with Section 3.10, the Special Servicer shall deliver to the Trustee an Officers' Certificate to the effect that pursuant to Section 3.10, the Special Servicer has determined to sell such Specially Serviced Mortgage Loan or REO Property in accordance with this Section 3.18. The Special Servicer may then offer to sell to any Person any Specially Serviced Mortgage Loan or any REO Property or, subject to the following sentence, purchase any such Specially Serviced Mortgage Loan or REO Property (in each case at the Repurchase Price therefor), but shall, in any event, so offer to sell any REO Property no later than the time determined by the Special Servicer to be sufficient to result in the sale of such REO Property within the period specified in Section 3.17(a). The Special Servicer shall deliver such Officers' Certificate and give the Trustee not less than ten Business Days prior written notice of its intention to sell any Specially Serviced Mortgage Loan or REO Property, in which case the Special Servicer shall accept the highest offer (of at least three offers) received from any Person for any Specially Serviced Mortgage Loan or any REO Property in an amount at least equal to the Repurchase Price therefor or, at its option, if it has received no offer at least equal to the Repurchase Price therefor, purchase the Specially Serviced Mortgage Loan or REO Property at the Repurchase Price. In the absence of any such offer or purchase by the Special Servicer, the Special Servicer shall accept the highest offer received from any Person that is determined by the Special Servicer to be a fair price, as determined in accordance with Section 3.18(b), for such Specially Serviced Mortgage Loan or REO Property, if the highest offeror is a Person other than an Interested Person, or is determined to be a fair price by the Trustee in accordance with Section 3.18(b), if the highest offeror is an Interested Person; PROVIDED, that the Trustee shall be entitled to engage, at the expense of the Trust Fund, an Independent appraiser to determine whether the highest offer is a fair price and, FURTHER PROVIDED, that if the highest offeror is an Interested Person such offer shall not be accepted if it is less than the Repurchase Price, unless the Rating Agencies have confirmed, in writing, that such acceptance will not, in itself, result in the qualification, downgrade or withdrawal of the then-current ratings assigned to the Certificates. Notwithstanding anything to the contrary herein, neither the Trustee, in its individual capacity, nor any of its Affiliates may make an offer or purchase any Specially Serviced Mortgage Loan or any REO Property pursuant hereto. - 82 - The Special Servicer shall not be obligated by either of the foregoing paragraphs or otherwise to accept the highest offer if the Special Servicer determines, in accordance with the Special Servicing Standard, that rejection of such offer would be in the best interests of the Certificateholders. In addition, the Special Servicer may accept a lower offer if it determines, in accordance with the Special Servicing Standard, that acceptance of such offer would be in the best interests of the Certificateholders (for example, if the prospective buyer making the lower offer is more likely to perform its obligations, or the terms offered by the prospective buyer making the lower offer are more favorable), PROVIDED that the offeror is not an Affiliate of the Special Servicer. In the event that the Special Servicer determines with respect to any REO Property that the offers being made with respect thereto are not in the best interests of the Certificateholders and that the end of the two-year period referred to in Section 3.17(a) with respect to such REO Property is approaching, the Special Servicer shall seek an extension of such two-year period in the manner described in Section 3.17(a); PROVIDED, HOWEVER, that the Special Servicer shall use its best efforts, consistent with the Special Servicing Standard, to sell any REO Property prior to the Rated Final Distribution Date. (b) In determining whether any offer received from an Interested Person represents a fair price for any Specially Serviced Mortgage Loan or any REO Property, the Trustee may conclusively rely on the opinion of an Independent appraiser or other expert in real estate matters retained by the Trustee at the expense of the Trust Fund. In determining whether any offer constitutes a fair price for any Specially Serviced Mortgage Loan or any REO Property, the Special Servicer (if the highest offeror is not an Interested Person) or the Trustee (or, if applicable, such appraiser) shall take into account, and any appraiser or other expert in real estate matters shall be instructed to take into account, as applicable, among other factors, any Updated Appraisal previously obtained, the period and amount of any delinquency on the affected Specially Serviced Mortgage Loan, the physical (including environmental) condition of the related Mortgaged Property or such REO Property, the state of the local economy and the Trust Fund's obligation to dispose of any REO Property within the time period specified in Section 3.17(a). (c) Subject to the provisions of Section 3.17, the Special Servicer shall act on behalf of the Trust Fund in negotiating and taking any other action necessary or appropriate in connection with the sale of any Specially Serviced Mortgage Loan or REO Property, including the collection of all amounts payable in connection therewith. Any sale of a Specially Serviced Mortgage Loan or any REO Property shall be without recourse to, or representation or warranty by, the Trustee, the Fiscal Agent, the Depositor, the Master 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 Master Servicer, the Depositor, the Fiscal Agent and the Trustee pursuant to the terms of this Agreement, no such Person who so performed shall have any liability to the Trust Fund or any Certificateholder with respect to the purchase price therefor accepted by the Special Servicer or, if the offeror is an Interested Person, the Trustee. (d) The Special Servicer shall file information returns regarding the abandonment or foreclosure of Mortgaged Properties with IRS at the time and in the manner required by the Code. - 83 - (e) The proceeds of any sale after deduction of the expenses of such sale incurred in connection therewith shall be promptly, and in any event within one Business Day following receipt thereof, deposited in the Collection Account in accordance with Sections 3.05(a)(i) and (ii). SECTION 3.19 ADDITIONAL OBLIGATIONS OF THE MASTER SERVICER AND SPECIAL SERVICER; INSPECTIONS. The Master Servicer shall inspect or cause to be inspected (at its own expense) each Mortgaged Property at such times and in such manner as are consistent with the Servicing Standard, but in any event shall inspect each Mortgaged Property securing a Mortgage Note with a Scheduled Principal Balance (or in the case of a Mortgage Note secured by more than one Mortgaged Property, having an Allocated Loan Amount) of (A) $_________ or more at least once every 12 months and (B) less than $_________ at least once every 24 months, in each case commencing as of _____________ (or at such lesser frequency as each Rating Agency shall have confirmed in writing to the Master Servicer will not result in a downgrade, qualification or withdrawal of the then current ratings assigned to any Class of the Certificates), PROVIDED, that if any Mortgage Loan (a) becomes a Specially Serviced Mortgaged Loan, or (b) has a debt service coverage ratio of less than ____, each related Mortgaged Property shall be inspected by the Special Servicer as soon as practicable and thereafter at least every 12 months for so long as any Monthly Payment with respect to such Mortgage Loan remains delinquent. SECTION 3.20 AUTHENTICATING AGENT. The Trustee may appoint an Authenticating Agent to execute and to authenticate Certificates. The Authenticating Agent must be acceptable to the Depositor and the Master 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 Master Servicer, having a combined capital and surplus of at least $15,000,000, authorized under such laws to do a trust business and subject to supervision or examination by federal or state authorities. The Trustee shall serve as the initial Authenticating Agent and the Trustee hereby accepts such appointment. Any corporation into which the Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Authenticating Agent shall be party, or any corporation succeeding to the corporate agency business of the Authenticating Agent, shall be the Authenticating Agent without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. The Authenticating Agent may at any time resign by giving at least 30 days' advance written notice of resignation to the Trustee, the Depositor and the Master Servicer. The Trustee may at any time terminate the agency of the Authenticating Agent by giving written notice of termination to the Authenticating Agent, the Depositor and the Master Servicer. Upon receiving a notice of resignation or upon such a termination, or in case at any time the Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 3.20, the Trustee promptly shall appoint a successor Authenticating Agent, which shall be acceptable to the Master Servicer and the Depositor, and shall - 84 - mail notice of such appointment to all Certificateholders. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers, duties and responsibilities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 3.20. The Authenticating Agent shall have no responsibility or liability for any action taken by it as such at the direction of the Trustee. Any reasonable compensation paid to the Authenticating Agent shall be an unreimbursable expense of the Trustee. SECTION 3.21 APPOINTMENT OF CUSTODIANS. The Trustee may appoint one or more Custodians to hold all or a portion of the Mortgage Loan Files as agent for the Trustee, by entering into a Custodial Agreement. The Trustee agrees to comply with the terms of each Custodial Agreement and to enforce the terms and provisions thereof against the Custodian for the benefit of the Certificateholders. Each Custodian shall be a depository institution subject to supervision by federal or state authority, shall have a combined capital and surplus of at least $10,000,000, shall have a long-term debt rating of at least "BBB" from Fitch and S&P, unless the Trustee shall have received prior written confirmation from each Rating Agency that the appointment of such Custodian would not cause such Rating Agency to withdraw, qualify or downgrade any of its then-current ratings on the Certificates, and shall be qualified to do business in the jurisdiction in which it holds any Mortgage Loan File. Each Custodial Agreement may be amended only as provided in Section 10.07. Each Custodian shall keep in force during the term of the applicable Custodial 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 under such Custodial Agreement in the form and amount that would meet the custodial requirements of prudent institutional commercial mortgage lenders and loan servicers. Any compensation paid to the Custodian shall be an unreimbursable expense of the Trustee. The Trustee shall serve as the initial Custodian. SECTION 3.22 REPORTS TO THE SECURITIES AND EXCHANGE COMMISSION; AVAILABLE INFORMATION. (a) Promptly following December 31, 199__, the Master Servicer shall file a Form 15 with the Commission and send a copy thereof to the Trustee. Prior to the effective date of such filing, the Master Servicer shall prepare and sign on behalf of the Trust Fund any and all Exchange Act Reports; PROVIDED, HOWEVER, that the Depositor shall prepare, sign and file with the Commission the initial Form 8-K relating to the Trust Fund. Each Exchange Act Report consisting of a Monthly Distribution Statement and any Special Event Report shall be prepared as an exhibit or exhibits to a Form 8-K. Each Exchange Act Report consisting of an Annual Report on Form 10-K shall identify the aggregate number of Holders of Public Certificates and Direct Participants holding positions in Public Certificates as of December 31 (or the nearest Business Day if such date is not a Business Day) of the related year. For each Exchange Act Report, the Master Servicer shall prepare (i) a manually-signed paper version of such report and (ii) an electronic version of such report, which version shall be prepared as a Microsoft Word for Windows file (or in such other format as the Trustee and the Master Servicer may agree), PROVIDED, that, with respect to the electronic version of - 85 - each Exchange Act Report consisting of a Monthly Distribution Statement, the Master Servicer need only deliver an electronic version of the related Form 8-K and the Trustee shall attach an electronic version of the related Monthly Distribution Statement thereto as an exhibit. For as long as such filings are required, Exchange Act Reports consisting of (i) a Monthly Distribution Statement shall be delivered within ten days after the related Distribution Date; and (ii) a Special Event Report shall be delivered within ten days after the occurrence of an event being reported or the date on which the Master Servicer has knowledge of the occurrence of such event, whichever is later. Electronic versions of each Exchange Act Report shall be delivered by the Trustee, with respect to the Monthly Distribution Statement, or the Master Servicer, with respect to Special Event Reports, to the Depositor on a computer diskette (delivered by courier in packaging designed to shield such diskette from damage in transmission) or by means of electronic data transfer system mutually agreed upon by the Depositor, the Trustee and the Master Servicer. Manually-signed copies of each Exchange Act Report shall be delivered to the Depositor to the address shown in this Agreement (or such other Persons as are designated in writing by the Depositor), with a copy to the Trustee. The Depositor shall file each Exchange Act Report with the Commission by means of the EDGAR system no later than five Business Days after receipt thereof from the Master Servicer. The Depositor shall pay any expenses (including attorney's fees and filing fees) incurred in connection with the preparation of any Exchange Act Report for filing by means of the EDGAR system. If information for any Exchange Act Report is incomplete by the date on which such report is required to be delivered to the Depositor hereunder, the Master Servicer shall prepare and execute a Form 12b-25 under the Exchange Act and shall deliver an electronic version of such form to the Depositor for filing electronically. The Depositor shall file such electronic version no later than the date on which the related Exchange Act Report is required to be filed under the Exchange Act. The Master Servicer shall deliver the related report in electronic form to the Depositor when such information is available and such completed report shall be filed electronically by the Depositor in the manner provided above. If the Depositor experiences unanticipated technical difficulties preventing the timely preparation and submission of any electronic filing of an Exchange Act Report, the Depositor shall file such Exchange Act Report, under cover of Form TH, in paper format no later than one Business Day after the date on which such Exchange Act Report was required to be filed under the Exchange Act and shall file the related Exchange Act Report as soon as reasonably practicable thereafter. None of the Master Servicer, the Special Servicer and the Trustee shall file a Form ID with respect to the Depositor. For as long as the Trust Fund is required to file Exchange Act Reports, the Trustee shall solicit any and all proxies of the Certificateholders in accordance with the Exchange Act and this Agreement whenever such proxies are required to be solicited pursuant to this Agreement or applicable law. - 86 - (b) For as long as the Trust Fund is required to file Exchange Act Reports, the Master Servicer shall promptly prepare a report (each, a "SPECIAL EVENT REPORT") reporting (i) any notice from a Mortgagor or insurance company, or any knowledge otherwise obtained, regarding an upcoming voluntary or involuntary prepayment (including that resulting from a casualty or condemnation); PROVIDED that a request by a Mortgagor or other Person 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; (ii) any imminent or actual default on a Mortgage Loan that results or which the Master Servicer, after consultation with the Special Servicer, reasonably believes is likely to result in the acceleration of the indebtedness due under such Mortgage Loan; (iii) the results of any property inspection which has revealed any material damage or deterioration or the presence of any environmental condition with respect to any Mortgaged Property; (iv) any notice from a Mortgagor, or any knowledge otherwise obtained, regarding any litigation involving such Mortgagor or any related Mortgaged Property which the Master Servicer reasonably believes is likely to have an adverse effect on the Mortgaged Property or the ability of such Mortgagor to pay the amounts due under the related Mortgage Loan; (v) any notice received from a Mortgagor, Manager or tenant of a Mortgaged Property, or any knowledge otherwise obtained, regarding the material default of such tenant under the terms of its lease or early termination by either the tenant or the Mortgagor of such lease, the bankruptcy of such tenant or its direct or indirect parent, or the loss of a license or permit relating to the Mortgaged Property; (vi) any amendment, modification or waiver of a material provision of a Mortgage Loan; (vii) any event of which the Master Servicer has actual knowledge (other than an event covered by clause (i)) which would result in the release of any part of the Mortgaged Property; PROVIDED, HOWEVER, that in the event that the Master Servicer after consulting with the Depositor and the Special Servicer determines in its good faith judgment that any of the preceding items will not materially affect the interests of the Certificateholders, the Master Servicer shall omit such item from the reporting obligation described above. The Special Servicer shall report to the Master Servicer any circumstance which, in the reasonable judgment of the Special Servicer constitutes one of the foregoing events within five Business Days of the Special Servicer having knowledge of such circumstance. In addition, in connection with their servicing of the Mortgage Loans, the Master Servicer and the Special Servicer shall provide to each other and to the Trustee written notice of any other known event with respect to a Mortgage Loan or REO Property that the Master Servicer or the Special Servicer, respectively, determines would have a material adverse effect on such Mortgage Loan or REO Property, which notice shall include an explanation as to the reason for such material adverse effect. (c) The Special Servicer shall collect all information available pursuant to the Specially Serviced Mortgage Loans and shall furnish such information, without modification, interpretation or analysis (except that the Special Servicer will use its best efforts to isolate management fees and funded reserves from Mortgagor reported expenses, if necessary), to the Master Servicer on or prior to the tenth day of each month with respect to information relating to the prior month and in a form sufficient to permit the Master Servicer to fulfill its obligations in this Section. Once per applicable period, the Master Servicer shall prepare a Summary Report based on information provided to the Master Servicer by the Special Servicer and similar information collected by the Master Servicer available pursuant to the non-Specially Serviced Mortgage Loans. The Master Servicer shall deliver a copy of each Summary Report to each Rating Agency and the Trustee and will publish such Summary Report (deleting all information identifying Mortgagors) on a World Wide Web site - 87 - maintained by it. The Master Servicer will advise the Trustee of the address of its Web site. None of the Master Servicer, the Special Servicer and the Trustee shall be responsible for the completeness or accuracy of such information provided by the Mortgagors. (d) To the extent that the expenses or duties of the Master Servicer are not materially increased, the Master Servicer shall, in accordance with such reasonable rules and procedures as it may adopt (which may include the requirement that an agreement that provides that such information shall be used solely for purposes of evaluating the investment characteristics of the Certificates be executed to the extent the Master Servicer deems such action to be necessary or appropriate), also make available any additional information relating to the Mortgage Loans, the Mortgaged Properties or the Mortgagors, for review by the Depositor, the Rating Agencies and any other Persons to whom the Master Servicer believes such disclosure is appropriate, in each case except to the extent doing so is prohibited by applicable law or by any related Loan Documents related to a Mortgage Loan. (e) The Trustee shall deliver a copy of each Summary Report and Annual Compliance Statement to each Rating Agency and, upon request, to each Certificateholder and Beneficial Owner (PROVIDED that each Certificateholder and Beneficial Owner may only make one request per month and will be required to pay any expenses incurred by the Trustee in connection with the provision of such information). The Trustee shall also deliver a copy of each Special Event Report to each Rating Agency, Certificateholder and, if known, Beneficial Owner within two Business Days of receipt. The Trustee shall deliver the foregoing information and reports regardless of whether the Trust Fund is still filing Exchange Act Reports. The Trustee shall also make available at its offices primarily responsible for administration of the Trust Fund, during normal business hours, or send to the requesting party at the expense of each such requesting party (other than the Rating Agencies) for review by the Depositor, the Rating Agencies, any Certificateholder, any Person identified to the Trustee by a Certificateholder as a prospective transferee of a Certificate and any other Persons designated by the Depositor the following items: (i) this Agreement, (ii) all Monthly Distribution Statements, (iii) all Annual Compliance Reports, (iv) all Summary Reports and (v) all Special Event Reports. The Master Servicer and the Special Servicer shall make available at its offices during normal business hours, or send to the requesting party at the expense of each such requesting party (other than the Rating Agencies) for review by the Depositor, the Trustee, the Rating Agencies, any Certificateholder, any Person identified to the 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 to be appropriate the following items: (i) all financial statements, occupancy information, rent rolls, average daily room rates and similar information received by the Master Servicer or the Special Servicer, as applicable, from each Mortgagor, (ii) the inspection reports prepared by or on behalf of the Master Servicer or the Special Servicer, as applicable, in connection with the property inspections pursuant to Section 3.19, (iii) any and all modifications, waivers and amendments of the terms of a Mortgage Loan entered into by the Master Servicer or the Special Servicer, as applicable and (iv) any and all officer's certificates and other evidence delivered to the Trustee and the Depositor to support the Master Servicer's determination that any Advance was, or if made would be, a Nonrecoverable Advance. Copies of any and all of the foregoing items shall be available from the Master Servicer or the Special Servicer, as applicable, or the Trustee, as applicable, upon request. - 88 - (f) Notwithstanding the obligations of the Master Servicer and Special Servicer set forth in the preceding provisions of this Section 3.22, the Master Servicer and Special Servicer may withhold any information not yet included in a Form 8-K filed with the Commission or otherwise made publicly available with respect to which the Trustee or the Master Servicer or Special Servicer has determined that such withholding is appropriate. (g) Notwithstanding any provisions in this Agreement to the contrary, the Trustee shall not be required to review the content of any Exchange Act Report for compliance with applicable securities laws or regulations, completeness, accuracy or otherwise, and the Trustee shall have no liability with respect to any Exchange Act Report filed with the Commission or delivered to Certificateholders. None of the Master Servicer, the Special Servicer and the Trustee shall be responsible for the accuracy or completeness of any information supplied by a Mortgagor or a third party for inclusion in any Form 8-K, and each of the Master Servicer, the Special Servicer and the Trustee shall be indemnified and held harmless by the Trust Fund against any loss, liability or expense incurred in connection with any legal action relating to any statement or omission or alleged statement or omission therein. None of the Trustee, the Special Servicer and the Master Servicer shall have any responsibility or liability with respect to any Exchange Act Report filed by the Depositor, and each of the Master Servicer, the Special Servicer and the Trustee shall be indemnified and held harmless by the Trust Fund against any loss, liability or expense incurred in connection with any legal action relating to any statement or omission or alleged statement or omission therein. SECTION 3.23 LOCK-BOX ACCOUNTS, CASH COLLATERAL ACCOUNTS, ESCROW ACCOUNTS AND RESERVE ACCOUNTS. The Master Servicer shall administer each Lock-Box Account, Cash Collateral Account, Escrow Account and Reserve Account in accordance with the related Mortgage or Loan Agreement, Cash Collateral Account Agreement or Lock-Box Agreement, if any. SECTION 3.24 PROPERTY ADVANCES. (a) The Master Servicer (or, to the extent provided in Section 3.24(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 purposes of distributions to Certificateholders and compensation to the Master Servicer, Special Servicer or Trustee, Property Advances shall not be considered to increase the principal balance of any Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so provide. (b) The Master Servicer shall notify the Trustee and the Fiscal Agent in writing promptly upon, and in any event within one Business Day after, becoming aware that it will be unable to make any Property Advance required to be made pursuant to the terms hereof, and in connection therewith, shall set forth in such notice the amount of such Property Advance, the Person to whom it will be paid, and the circumstances and purpose of such Property Advance, and shall set forth therein information and instructions for the payment of such Property Advance, and, on the date specified in such notice for the payment of such Property Advance, or, if the date for payment has passed or if no such date is specified, then within five Business Days following such notice, the Trustee, subject to the provisions of Section 3.24(c), shall pay the amount of such Property Advance in - 89 - accordance with such information and instructions. If the Trustee fails to make any Property Advance required to be made under this Section 3.24, the Fiscal Agent, subject to the provisions of Section 3.24(c), shall make such Advance on the same day the Trustee was required to make such Property Advance and, thereby, the Trustee shall not be in default under this Agreement. (c) None of the Master 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 Master 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 Master Servicer or the Trustee, as applicable, that a Property Advance, if made, would be a Nonrecoverable Advance. The Trustee and the Fiscal Agent, in determining whether or not a Property Advance previously made is, or a proposed Property Advance, if made, would be, a Nonrecoverable Advance shall be subject to the standards applicable to the Master Servicer hereunder. (d) The Master Servicer, the Trustee and/or the Fiscal Agent, as applicable, shall be entitled to the reimbursement of Property Advances made by any of them to the extent permitted pursuant to Section 3.06(ii) of this Agreement, together with any Advance Interest Amount in respect of such Property Advances, and the Master Servicer hereby covenants and agrees to promptly seek and effect the reimbursement of such Property Advances from the related Mortgagors to the extent permitted by applicable law and the related Loan Documents. SECTION 3.25 APPOINTMENT OF SPECIAL SERVICER. (a) __________________________ L.P. will act as the initial Special Servicer to service each Specially Serviced Mortgage Loan and perform the other obligations of the Special Servicer hereunder. (b) The Controlling Class Representative at any time shall be entitled to remove the Special Servicer with or without cause and to appoint a successor Special Servicer, PROVIDED that each Rating Agency confirms to the Trustee in writing that such appointment, in and of itself, will not cause a downgrade, qualification or withdrawal of the then current ratings assigned to any Class of Certificates. The Special Servicer shall retain its right to receive all amounts accrued or owing to it under this Agreement and Principal Recovery Fees actually received subsequent to such removal in respect of Specially Serviced Mortgage Loans liquidated or modified prior to such removal, and which do not thereafter again become Specially Serviced Mortgage Loans, and the right to the benefits of Section 6.03, notwithstanding any such removal. The Monitoring Certificateholders shall assume any costs relating to the removal without cause of the Special Servicer by the Controlling Class Representative and to the subsequent appointment of a successor Special Servicer. If there is a Special Servicer Event of Default the Special Servicer shall be removed and replaced pursuant to Sections 7.01(c) and 7.02. (c) The appointment of any such successor Special Servicer, shall not relieve the Master Servicer, the Trustee or the Fiscal Agent of their respective obligations to make Advances as set forth herein; PROVIDED, HOWEVER, the Master Servicer shall not be liable for any actions or any inaction of such successor Special Servicer. Any termination fee payable to the terminated Special - 90 - Servicer (and it is acknowledged that there is no such fee payable in the event of a termination of the Master Servicer as Special Servicer or in the event of a termination for breach of this Agreement) shall be paid by the Certificateholders so terminating the Special Servicer and shall not in any event be an expense of the Trust Fund. (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 Master Servicer and Trustee, and the Trustee has received written confirmation from each Rating Agency that such appointment would not cause any Rating Agency to qualify, withdraw or downgrade any of its then current ratings on any Certificates. Any successor Special Servicer shall make the representations and warranties provided for in Section 2.04(b), with the necessary changes in points of detail as are necessary, as to names, offices and the like. SECTION 3.26 TRANSFER OF SERVICING BETWEEN SERVICER AND SPECIAL SERVICER; RECORD KEEPING. (a) The Master Servicer shall notify the Trustee and the Special Servicer as promptly as practicable by telephone and in an electronic format after it becomes aware of (i) any facts or circumstances that might in the reasonable judgment of the Master Servicer consistent with the Servicing Standard result in any Mortgage Loan becoming a Specially Serviced Mortgage Loan or (ii) the occurrence of a Servicing Transfer Event. Upon the occurrence of a Servicing Transfer Event, the Master Servicer shall use its best efforts to provide the Special Servicer with all information, documents (but excluding the original documents constituting the Mortgage Loan File) and records (including records stored electronically on computer tapes, magnetic disks and the like) relating to the Mortgage Loan and reasonably requested by the Special Servicer to enable it to assume its duties hereunder with respect thereto without acting through a subservicer. The Master Servicer shall use its best efforts to comply with the preceding sentence within five Business Days after the occurrence of a Servicing Transfer Event and in any event shall continue to act as Master Servicer and administrator of such Mortgage Loan until the Special Servicer has commenced the servicing of such Mortgage Loan, which shall occur on the Servicing Transfer Date. With respect to each Mortgage Loan that becomes a Specially Serviced Mortgage Loan, the Master Servicer shall instruct the related Mortgagor to continue to remit all payments in respect of such Mortgage Loan to the Master Servicer. The Master Servicer and Special Servicer may agree that, notwithstanding the preceding sentence, with respect to each Mortgage Loan that became a Specially Serviced Mortgage Loan, the Master Servicer shall instruct the related Mortgagor 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 Master Servicer. The Special Servicer shall remit to the Master Servicer any such payments received by it pursuant to the preceding sentence within one Business Day of receipt. The Master Servicer shall forward any notices it would otherwise send to the Mortgagor of a Specially Serviced Mortgage Loan to the Special Servicer who shall send such notice to the related Mortgagor. Upon determining with respect to a Specially Serviced Mortgage Loan that (i) three consecutive Monthly Payments on a Specially Serviced Mortgage Loan have been made in accordance with the terms of the related Mortgage Note (taking into account any grace periods - 91 - contained therein), (ii) such Mortgage Loan is current as to payments of principal and interest and (iii) no Servicing Transfer Event is continuing, the Special Servicer shall immediately give written notice thereof to the Master Servicer and the Trustee, and upon giving such notice, such Mortgage Loan shall cease to be a Specially Serviced Mortgage Loan, the Special Servicer's obligation to service such Mortgage Loan shall terminate and the obligations of the Master 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 Mortgagor has been instructed, pursuant to the preceding paragraph, to make payments to the Special Servicer, upon such determination, the Special Servicer shall instruct the related Mortgagor to remit all payments in respect of such Mortgage Loan directly to the Master 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 Loan File" for inclusion in the related Mortgage Loan 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 Mortgagor, and the Special Servicer shall promptly provide copies of all of the foregoing to the Master Servicer as well as copies of any analysis or internal review prepared by or for the benefit of the Special Servicer. (c) Not later than the Business Day preceding each date on which the Master Servicer is required to furnish a report under Section 3.13(a) to the Trustee, the Special Servicer shall deliver to the Trustee, with a copy to the Master Servicer, a written statement describing, on a Mortgage Loan by Mortgage Loan basis, (i) the amount of all payments on account of interest received on each Specially Serviced Mortgage Loan, the amount of all payments on account of principal, including Principal Prepayments, on each Specially Serviced Mortgage Loan, the amount of Net Insurance Proceeds and Net Liquidation Proceeds received with respect to each Specially Serviced Mortgage Loan, and the amount of net income or net loss, as determined from management of a trade or business on, the furnishing or rendering of a non-customary service to the tenants of, or the receipt of any rental income that does not constitute Rents from Real Property with respect to the REO Property relating to each applicable Specially Serviced Mortgage Loan, in each case in accordance with Section 3.17 and (ii) such additional information relating to the Specially Serviced Mortgage Loans as the Master Servicer or Trustee reasonably requests for inclusion in such report. (d) Notwithstanding the provisions of the preceding subsection (c), the Master 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 Master Servicer with any information reasonably required by the Master Servicer to perform its duties under this Agreement. (e) The Master Servicer shall furnish to the Special Servicer a current copy of any "watch list" that it maintains with respect to the Mortgage Loans. - 92 - SECTION 3.27 MASTER SERVICER TO PAY FEES OF RATING AGENCIES. For so long as either Rating Agency shall continue to rate any Class of Certificates, the Master Servicer shall pay from its own funds the monitoring, surveillance and other fees of such Rating Agency in connection with maintenance of such rating or ratings, without any right of reimbursement therefor. SECTION 3.28 LIMITATIONS ON AND AUTHORIZATIONS OF THE MASTER SERVICER AND SPECIAL SERVICER WITH RESPECT TO CERTAIN MORTGAGE LOANS. (a) With respect to any Specially Serviced Mortgage Loan which permits the related Mortgagor, with the consent or grant of a waiver by the mortgagee, to incur additional indebtedness or to amend or modify the related Mortgagor's organizational documents, then the Special Servicer may only consent to either such action, or grant a waiver with respect thereto, if the Special Servicer determines that such consent or waiver is likely to result in a greater recovery on a present value basis (discounted at the related Mortgage Interest Rate) than would not consenting to such action and the Special Servicer first obtains written confirmation from the Rating Agencies that such consent or grant of a waiver would not, in and of itself, result in a downgrade, qualification or withdrawal of any of the then current ratings assigned to the Certificates. The Master Servicer shall not be entitled or required to consent to, or grant a waiver with respect to, either action. (b) With respect to all Mortgage Loans that provide that the holder of the related Mortgage Note may apply the monthly payment against principal, interest and any other sums due in the order as the holder shall determine, the Master Servicer shall apply such Monthly Payment to interest (other than Default Interest) under the related Mortgage Loan prior to application to principal or any other sums due. (c) To the extent not inconsistent with the related Mortgage Loan, the Master Servicer shall not consent to a change of franchise affiliation with respect to a Mortgaged Property unless it obtains written confirmation from the Rating Agencies that such consent would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates. (d) With respect to the Mortgage Loans that (i) require earthquake insurance, or (ii) (A) at the date of origination were secured by Mortgaged Properties on which the related Mortgagor maintained earthquake insurance and (B) have provisions which enable the Master Servicer to continue to require the related Mortgagor to maintain earthquake insurance, the Master Servicer shall require the related Mortgagor to maintain such insurance in the amount, in the case of clause (i), required by the Mortgage Loan and in the amount, in the case of clause (ii), maintained at origination, in each case, to the extent such amounts are available at commercially reasonably rates. (e) The Master Servicer shall send written notice to each Mortgagor and the related Manager and clearing bank that, if applicable, the Master Servicer and/or the Trustee has been appointed as the "Designee" of the "Lender" under any related Lock-Box Agreement. - 93 - SECTION 3.29 MODIFICATION, WAIVER, AMENDMENT AND CONSENTS. (a) Subject to subsections (b) through (h) below, as applicable, each of the Master Servicer, any subservicer and the Special Servicer may agree to any modification, waiver or amendment of any term of any Mortgage Loan. (b) The Master Servicer, any subservicer or the Special Servicer, as applicable, shall determine, in accordance with the Servicing Standard or the Special Servicing Standard, as applicable, that any modification, waiver or amendment is appropriate. (c) None of the Master Servicer, any subservicer or the Special Servicer shall agree to any modification, waiver or amendment of any term of any Mortgage Loan if such modification, waiver or amendment would: (i) affect the amount or timing of any related scheduled payments of principal, interest or other amount (including Prepayment Premiums and Yield Maintenance Charges) payable under the Mortgage Loan; (ii) affect the obligation of the related Mortgagor to pay a Prepayment Premium or Yield Maintenance Charge or permit a Principal Prepayment during the applicable Lock-out Period; (iii) except as expressly provided by the related Mortgage, or in connection with a material adverse environmental condition at the related Mortgaged Property, result in a release of the lien of the related Mortgage on any material portion of such Mortgaged Property without a corresponding Principal Prepayment; or (iv) in the judgment of the Master Servicer or the Special Servicer, as applicable, materially impair the security for the Mortgage Loan or reduce the likelihood of timely payment of amounts due thereon. (d) Neither the Master Servicer nor the Special Servicer shall consent to the modification of any term of a Mortgage Loan pursuant to this Section 3.29, consent to the release or substitution of any collateral for a Mortgage Loan or otherwise alter, delete or add, in whole or in part, any legal right or obligation of the related Mortgagor or the Trustee, as holder of the related Mortgage Loan, unless such modification would not be a "significant modification" as such term is defined in Code Section 1001 and applicable Treasury Regulations thereunder or Treasury Regulations Section 1.860G-2(b)(3). (e) Notwithstanding anything set forth in Section 3.29(c) or (d), the Master Servicer or the Special Servicer may, consistent with the Servicing Standard or the Special Servicing Standard, as applicable, and in compliance with any applicable Mortgage Loan Document, only allow a substitution of collateral and the assumption of a Mortgagor's obligations with respect to a Mortgage Loan (i) in accordance with the terms thereof and (ii) provided the Master Servicer or Special Servicer, as applicable, has received an Opinion of Counsel at the expense of the Master Servicer or the Special Servicer, as applicable, or the Mortgagor (unless the Special Servicer owns the Most - 94 - Subordinate Class of Certificates in which case, at the expense of the Trust Fund), to the effect that the addition of such collateral will not result in a tax being imposed on the Trust Fund or cause any REMIC created pursuant to this Agreement to fail to qualify as a REMIC under the REMIC Provisions at any time the Certificates are outstanding. (f) Notwithstanding anything set forth in Section 3.29(c), the Special Servicer may, consistent with the Special Servicing Standard: (i) reduce the amounts owing under any Specially Serviced Mortgage Loan by forgiving principal, accrued interest and/or any Prepayment Premium or Yield Maintenance Charge; (ii) reduce the amount or change the timing of the Monthly Payment on any Specially Serviced Mortgage Loan, including by way of a reduction in the related Mortgage Interest Rate; (iii) forbear in the enforcement of any right granted under any Mortgage Note or Mortgage relating to a Specially Serviced Mortgage Loan; (iv) extend the maturity date of any Specially Serviced Mortgage Loan; and/or (v) accept a Principal Prepayment during any Lockout Period; PROVIDED, HOWEVER, that (x) the related Mortgagor is in default with respect to the Specially Serviced Mortgage Loan or, in the judgment of the Special Servicer, such default is reasonably foreseeable, (y) in the sole, good faith judgment of the Special Servicer, such modification, waiver or amendment would increase the recovery to Certificateholders on a net present value basis documented to the Trustee, by means of an officer's certificate of the Special Servicer setting forth the procedures and considerations of the Special Servicer forming the basis of the Special Servicer's determination (including but not limited to information such as related income and expense statements, rent rolls, occupancy status, property inspections, and an Independent MAI appraisal of the related Mortgaged Property, if otherwise required pursuant to this Agreement or the Special Servicing Standard), and (z) such modification, waiver or amendment does not result in a tax being imposed on the Trust Fund or cause any REMIC created pursuant to this Agreement to fail to qualify as a REMIC under the REMIC Provisions at any time the Certificates are outstanding, based on an Opinion of Counsel obtained at the expense of the Trust Fund. (g) Notwithstanding anything set forth in this Agreement, in no event shall the Special Servicer be permitted to: (i) extend the maturity date of a Mortgage Loan beyond a date that is two years prior to the Rated Final Distribution Date; or - 95 - (ii) if the Mortgage Loan is secured by a ground lease, extend the maturity date of such Mortgage Loan beyond a date which is 10 years prior to the expiration of the term of such ground lease. (h) [RESERVED] (i) The Master Servicer or the Special Servicer, as applicable, shall provide copies of any modifications or extensions to each Rating Agency and the Controlling Class Representative. All modifications, waivers, amendments and other actions entered into or taken in respect of the Mortgage Loans pursuant to this Section 3.29 shall be in writing. The Master Servicer or the Special Servicer, as applicable, shall notify the other Servicer and the Trustee, in writing, of any modification, waiver, amendment or other action entered into or taken in respect of any Mortgage Loan pursuant to this Section 3.29, prior to the effective date thereof and the date as of which the related modification, waiver or amendment is to take effect, and shall deliver to the Trustee or the related Custodian for deposit in the related Mortgage Loan File (with a copy to the Master Servicer) an original counterpart of the agreement relating to such modification, waiver, amendment or other action, promptly (and in any event within 10 Business Days) following the execution thereof. Copies of each agreement whereby any such modification, waiver or amendment of any term of any Mortgage Loan is effected shall be made available for review during normal business hours at the offices of the Special Servicer. Following the execution of any modification, waiver or amendment agreed to by the Master Servicer or the Special Servicer, as applicable, pursuant to subsection (a), (e) or (f) above, as applicable, such Servicer shall deliver to the Trustee (with a copy to the Master Servicer, if such agreement is by the Special Servicer) an Officer's Certificate setting forth in reasonable detail the basis of the determination made by it pursuant to subsection (a), (e) or (f) above. (j) [RESERVED] (k) Any payment of interest which is deferred pursuant to any modification, waiver or amendment permitted hereunder, shall not, for purposes hereof, including, without limitation, calculating monthly distributions to Certificateholders, be added to the unpaid principal balance of the related Mortgage Loan, notwithstanding that the terms of such Mortgage Loan so permit or that such interest may actually be capitalized. (l) Promptly following the occurrence of a Servicing Transfer Event, the Special Servicer shall request from the Trustee the name of the current Controlling Class Representative. Upon receipt of the name of such current Controlling Class Representative from the Trustee, the Special Servicer shall notify the Controlling Class Representative of the occurrence of such Servicing Transfer Event. Officers of the Special Servicer shall, at the request of the Controlling Class Representative, be reasonably available during regular business hours to discuss with such Controlling Class Representative objectives and strategies. (m) No later than thirty (30) days after a Servicing Transfer Date for a Mortgage Loan, the Special Servicer shall deliver to the Trustee, the Master Servicer, each Rating Agency and the Controlling Class Representative a report (the "ASSET STATUS REPORT") with respect to such Mortgage - 96 - Loan and the related Mortgaged Property. Such Asset Status Report shall set forth the following information to the extent reasonably determinable: (i) summary of the status of such Specially Serviced Mortgage Loan and any negotiations with the related Mortgagor; (ii) consideration of alternatives to the exercise of remedies (such as forbearance relief, modification of the terms and conditions of such Mortgage Loan, disposition of the Specially Serviced Mortgage Loan or the related Mortgaged Property and application of the proceeds of such disposition to the outstanding principal balance of such Mortgage Loan and interest thereon, or abandonment of the related Mortgaged Property); (iii) a discussion of the probable time frames and estimated amount of any related Property Advances applicable to each of the alternatives referred to above; (iv) a discussion of the legal and environmental considerations reasonably known to the Special Servicer, consistent with the Special Servicing Standard, that are applicable to the exercise of remedies as aforesaid and to the enforcement of any related guaranties or other collateral for the related Mortgage Loan and a recommendation as to whether outside legal counsel should be retained; (v) estimated budgets for any operating or capital funds expected to be required for the related Mortgaged Property; (vi) the most current rent roll available for and any strategy for the leasing or releasing of the related Mortgaged Property; (vii) the Special Servicer's analysis and recommendations (which will include a discussion of alternative courses of action and a comparison of the probable benefits and detriments of each alternative course of action) on how such Specially Serviced Mortgage Loan might be returned to performing status and returned to the Master Servicer for regular servicing under this Agreement or otherwise realized upon; and (viii) such other information as the Special Servicer deems relevant in light of the Special Servicing Standard. The Controlling Class Representative may object to any Asset Status Report within 10 Business Days of receipt; PROVIDED, HOWEVER, that the Special Servicer shall implement the recommended action as outlined in such Asset Status Report if it makes an affirmative determination that such objection is not in the best interest of all of the Certificateholders. If the Controlling Class Representative disapproves such Asset Status Report and the Special Servicer has not made the affirmative determination described above, the Special Servicer will revise such Asset Status Report as soon as practicable thereafter, but in no event later than 30 days after such disapproval. The Special Servicer shall revise such Asset Status Report as described above in this subsection (m) until the Controlling Class Representative shall fail to disapprove such revised Asset Status Report in writing within ten (10) Business Days of receiving such revised Asset Status Report or until the - 97 - Special Servicer makes a determination that such objection is not in the best interest of all of the Certificateholders or such objection is inconsistent with the Special Servicing Standard. The Special Servicer may, from time to time, modify any Asset Status Report it has previously delivered and implement such report, provided such report shall have been prepared, reviewed and not rejected pursuant to the terms of this Section. Notwithstanding the foregoing, the Special Servicer (i) may, following the occurrence of an extraordinary event with respect to the related Mortgaged Property, take any action set forth in such Asset Status Report before the expiration of a ten (10) Business Day period if the Special Servicer has reasonably determined that failure to take such action would materially and adversely affect the interest of the Certificateholders and it has made a reasonable effort to contact the Controlling Class Representative and (ii) in any case, shall determine whether such disapproval is not in the best interest of all the Certificateholders pursuant to the Special Servicing Standard. (n) The Special Servicer shall have the authority to meet with the Mortgagor for any Specially Serviced Mortgage Loan and take such actions consistent with Special Servicing Standard and the related Asset Status Report. The Special Servicer shall not take any action inconsistent with the related Asset Status Report. (o) Upon request of any Certificateholder (or any Beneficial Owner, if applicable, which shall have provided the Trustee with evidence satisfactory to the Special Servicer and the Trustee of its interest in a Certificate) or Rating Agency, the Trustee shall mail, without charge, to the address specified in such request a copy of the most current Asset Status Report for any Specially Serviced Mortgage Loan or REO Property. (p) Prior to delivering an Asset Status Report to any Certificateholder or Beneficial Owner, the Trustee shall have obtained an acknowledgment in the form of EXHIBIT K from the recipient thereof that U.S. securities law may restrict the use of the information in the Asset Status Report. ARTICLE IV DISTRIBUTIONS TO CERTIFICATEHOLDERS SECTION 4.01 DISTRIBUTIONS. (a) On each Distribution Date, the Trustee shall apply amounts on deposit in the Certificate Account, to the extent of the Available Distribution Amount, in the following order of priority: (i) any Prepayment Premiums, to the Classes of Offered Certificates and Class X Certificates as follows: to each of the Class A1, Class A2, Class A3, Class B, Class C, Class D, Class E, and Class F Certificates, for each such Class, through the Distribution Date on which the Class Balance of each such Class has been reduced to zero, an amount equal to the product of (a) a fraction, the numerator of which is the amount distributed as principal to such Class on such Distribution Date, and the denominator of which is the total amount distributed as principal to all Classes of Certificates on such Distribution Date, (b) 25% and - 98 - (c) the total amount of Prepayment Premiums collected during the related Prepayment Period; any Prepayment Premiums remaining after such distributions shall be applied to the holders of the Class X Certificates; (ii) any Yield Maintenance Charges, to the Classes of Offered Certificates and Class X Certificates as follows: to each of the Class A1, Class A2, Class A3, Class B, Class C, Class D, Class E, and Class F Certificates, for each such Class, through the Distribution Date on which the Class Balance of each such Class has been reduced to zero, an amount equal to the product of (a) a fraction, the numerator of which is the amount distributed as principal to such Class on such Distribution Date, and the denominator of which is the total amount distributed as principal to all Classes of Certificates on such Distribution Date, (b) the Base Interest Fraction for the related principal prepayment and such Class of Offered Certificates and (c) the aggregate amount of Yield Maintenance Charges collected on such principal prepayment during the related Prepayment Period; any Yield Maintenance Charges collected during the related Prepayment Period remaining after such distributions shall be applied to the holders of the Class X Certificates; (iii) subject to the proviso in clause (v) below, to distributions of interest on the Classes of Certificates then outstanding with the highest priority for interest payment as set forth below in an amount equal to the respective Interest Distribution Amounts in respect thereof for such Distribution Date and any unpaid portion of the respective Interest Distribution Amounts in respect thereof for any prior Distribution Date together with interest thereon at the applicable Pass-Through Rate; (iv) subject to the proviso in clause (v) below, to distributions of principal equal to the Principal Distribution Amount to the Classes of Certificates then outstanding in the order set forth below; (v) sequentially, to distributions of interest to the remaining Certificateholders in the priority set forth below in an amount equal to the Interest Distribution Amounts in respect thereof for such Distribution Date and any unpaid portion of respective Interest Distribution Amounts in respect thereof for any prior Distribution Date together with interest thereon at the applicable Pass-Through Rate, PROVIDED that on any Distribution Date on which the Class Balance of a Class of Certificates is reduced to zero pursuant to clause (iv) above, interest distributions pursuant to clause (iii) above will be made to the Class of Certificates outstanding with the next highest priority for interest payments prior to making distributions of principal on such Class pursuant to clause (iv) above; (vi) sequentially to the Classes of Certificates in the order set forth below for distribution of principal any amounts recovered representing Realized Losses previously allocated to such Class in reduction of its Class Balance; and (vii) to distributions to the Class R-I Certificateholders, in an amount equal to the balance, if any. - 99 - The priority for interest payments for purposes of clauses (iii) and (v) above, is: first to distributions of interest on the Class Al, Class A2, Class A3 and Class X Certificates, pro rata, based on their respective Interest Accrual Amounts; second to distributions of interest on the Class B Certificates; third to distributions of interest on the Class C Certificates; fourth to distributions of interest on the Class D Certificates; fifth to distributions of interest on the Class E Certificates; sixth, to distributions of interest on the Class F Certificates; and then sequentially to the Class G, Class H, Class J, Class K and Class L Certificates up to their respective Interest Distribution Amounts. The Principal Distribution Amount for such Distribution Date set forth in clause (iv) above will be applied to the payment of principal of the Class Al, Class A2, Class A3, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K and Class L Certificates, in that order, until their respective Class Balances have been reduced to zero; PROVIDED, that on and after any Distribution Date as of which the Class Balance of the Class B Certificates has been reduced to zero, the Principal Distribution Amount shall be applied to payments of principal of the Class A1, Class A2 and Class A3 Certificates, pro rata, based on their respective Class Balances. (b) All distributions made with respect to each Class on each Distribution Date shall be allocated pro rata among the outstanding Certificates in such Class based on their respective Percentage Interests. All such distributions with respect to each Class (other than the final distribution with respect thereto) will be made on each Distribution Date to the Certificateholders of the respective Class of record at the close of business on the related Record Date and shall be made by wire transfer of immediately available funds to the account of any such Certificateholder at a bank or other entity having appropriate facilities therefor, if such Certificateholder shall have provided the Trustee with wiring instructions no less than five Business Days prior to the related Record Date (or, in the case of the first Distribution Date, no later than the Closing Date), or otherwise by check mailed to the address of such Certificateholder appearing in the Certificate Register. The final distribution on each Certificate will be made in like manner, but only upon presentment and surrender of such Certificate at the office of the Certificate Registrar or such other location specified in the notice to Certificateholders of such final distribution. (c) Whenever the Trustee expects that the final distribution with respect to any Class of Certificates will be made on the next Distribution Date, the Trustee shall, promptly mail to each Holder on such date of such Class of Certificates and each Rating Agency a notice to the effect that: (i) the Trustee expects 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 Certificate Registrar therein specified, and (ii) no interest shall accrue on such Certificates from and after such Distribution Date. Any funds not distributed to any Holder or Holders of Certificates of such Class on such Distribution Date because of the failure of such Holder or Holders to tender their Certificates shall, on such date, be set aside and held in trust and credited to the account of the appropriate non-tendering Holder or Holders. If any Certificates as to which notice has been given pursuant to this Section 4.01(c) shall not have been surrendered for cancellation within six months after the time specified in such notice, the Trustee shall mail a second notice to the remaining non-tendering Certificateholders to surrender - 100 - their Certificates for cancellation in order to receive the final distribution with respect thereto. If within one year after the second notice all such Certificates shall not have been surrendered for cancellation, the Trustee, directly or through an agent, shall take such steps to contact the remaining non-tendering Certificateholders concerning surrender of their Certificates as it shall deem appropriate. The costs and expenses of holding such funds in trust and of contacting such Certificateholders following the first anniversary of the delivery of such second notice to the non-tendering Certificateholders shall be paid out of such funds. No interest shall accrue or be payable to any Certificateholder on any amount held in trust hereunder by the Trustee as a result of such Certificateholder's failure to surrender its Certificate(s) for final payment thereof in accordance with this Section 4.01(c). SECTION 4.02 STATEMENTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION; INFORMATION FURNISHED TO FINANCIAL MARKET PUBLISHER. (a) On each Distribution Date, the Trustee shall forward by mail to each Holder, the Depositor, the Underwriter and each Rating Agency, and to each Beneficial Owner (which shall have certified to the Trustee that it is a Beneficial Owner) which shall have requested such report from the Trustee, a statement as to the distributions made on such Distribution Date setting forth the information set forth in EXHIBIT M based, in so far as practicable and relevant, on the reports furnished to the Trustee by the Master Servicer for such Distribution Date in accordance with the provisions of this Agreement. In addition, on each Distribution Date, the Trustee shall forward by mail to each Rating Agency, the Special Servicer and the Underwriter each statement received prior to such Distribution Date prepared by the Master Servicer pursuant to this Agreement. In addition, if the Underwriter requests such statement in electronic format, the Trustee shall provide such information free of charge. On each Distribution Date, the Trustee shall forward to the Depositor, to each Rating Agency, to the Underwriter and to the Master Servicer a copy of the reports forwarded to the Certificateholders on such Distribution Date and, if not otherwise set forth in such reports a statement setting forth the amounts, if any, actually distributed with respect to the Certificates on such Distribution Date. The Trustee shall also provide such reports to the Master Servicer in an electronic format reasonably acceptable to the Master Servicer and the Trustee. 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, a statement setting forth for each Class, as applicable, (i) the Principal Distribution Amount and the amount of the Available Distribution Amount allocable to principal included therein, and (ii) the Interest Distribution Amount distributable on such Class and any related Class X Component and the amount of the Available Distribution Amount allocable thereto, 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. - 101 - Subject to Section 3.29(p), upon request of any Certificateholder (or any Beneficial Owner, if applicable which shall have provided the Trustee with evidence satisfactory to the Special Servicer and the Trustee of its interest in a Certificate) or Rating Agency, the Trustee shall mail, without charge, to the address specified in such request, a copy of the most current Asset Status Report for any Specially Serviced Mortgage Loan or REO Property. In addition, upon receipt of a written request of any Certificateholder (or any Beneficial Owner, if applicable, which shall have provided the Trustee with evidence satisfactory to the Master Servicer and the Trustee of its interest in a Certificate) for a copy of any other report, the Trustee shall forward such written request to the Master Servicer. To the extent such report is available to the Master Servicer, the Master Servicer shall deliver a copy thereof to the Trustee for delivery to the requesting Certificateholder (or Beneficial Owner) at the address specified in such request. The request, reproduction and delivery of such report, shall be at the expense of the requesting Certificateholder (or Beneficial Owner). (b) The Trustee covenants to furnish or cause to be furnished, promptly upon the written request of any Holder of a Class X, Class G, Class H, Class J, Class K, Class L, Class R-I, Class R-II or Class R-III Certificate (or a Beneficial Owner which shall have certified to the Trustee that it is a Certificate Owner of any such Class) reasonably current Rule 144A Information (as defined below) to such Certificateholder or to a prospective transferee of such a Certificate (or interests in such Certificate) designated by such Certificateholder, as the case may be, in connection with the resale of such Certificate or such interests by such Certificateholder pursuant to Rule 144A. "Rule 144A Information" shall mean the information specified in Rule 144A(d)(4)(i) and (ii) under the Securities Act of 1933, as amended. The Trustee shall advise the Master Servicer of any request by a Certificateholder and shall consult with the Master Servicer as to the information to be supplied. Based upon such consultation and to the extent the Trustee is not in possession of reasonably current Rule 144A Information on the date of any such request, the Master Servicer shall, upon request from the Trustee, promptly provide the Trustee with reasonably current Rule 144A Information to the extent reasonably available. The Trustee may place a disclaimer on any such Rule 144A Information to the extent it is not the source of such information. (c) Each of the Trustee, the Master Servicer and the Special Servicer shall deliver to the Controlling Class Representative copies of all reports or notices prepared thereby or received thereby. The Trustee shall only be obligated to deliver the statements, reports and information contemplated by this Section 4.02 to the extent it receives the necessary underlying information from the Master Servicer or the Special Servicer and shall not be liable for any failure to deliver any thereof on the prescribed due dates, to the extent caused by failure to receive timely such underlying information. Nothing herein shall obligate the Trustee, the Master Servicer or the Special Servicer to violate any applicable law prohibiting disclosure of information with respect to any Mortgagor and the failure of the Trustee, the Master Servicer or the Special Servicer to disseminate information for such reason shall not be a breach hereof. SECTION 4.03 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 - 102 - 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 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 otherwise payable 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 4.04 REMIC COMPLIANCE. (a) The parties intend that each of REMIC I, REMIC II and REMIC III shall constitute, and that the affairs of each of REMIC I, REMIC II and REMIC III 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 REMIC I, REMIC II and REMIC III and shall on behalf of each of REMIC I, REMIC II and REMIC III: (i) prepare, sign and file, or cause to be prepared and filed, all required Tax Returns for each of REMIC I, REMIC II and REMIC III, using a calendar year as the taxable year for each of REMIC I, REMIC II and REMIC III 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 REMIC I, REMIC II and REMIC III, to be treated as a REMIC on Form 1066 for its first taxable year, in accordance with the REMIC Provisions; (iii) prepare and forward, or cause to be prepared and forwarded, to the Certificateholders and the Internal Revenue Service and applicable state and local tax authorities all information reports as and when required to be provided to them in accordance with the REMIC Provisions of the Code; (iv) if the filing or distribution of any documents of an administrative nature not addressed in clauses (i) through (iii) of this Section 4.04(a) is then required by the REMIC Provisions in order to maintain the status of REMIC I, REMIC II or REMIC III as a REMIC or is otherwise required by the Code, prepare, sign and file or distribute, or cause to be prepared and signed and filed or distributed, such documents with or to such Persons when and as required by the REMIC Provisions or the Code or comparable provisions of state and local law; (v) within thirty days of the Closing Date, furnish or cause to be furnished to the Internal Revenue Service, on Form 8811 or as otherwise may be required by the Code, the name, title and address of the Person that the holders of the Certificates may contact for tax information relating thereto (and the Trustee shall act as the representative of each of REMIC I, REMIC II and REMIC III for this purpose), together with such additional information as may be required by such Form, and shall update such information at the time or times and in the manner required by the Code (and the Depositor agrees within 10 Business Days of the Closing Date to provide any information reasonably requested by the Master Servicer, the Special Servicer or the Trustee and necessary to make such filing); and (vi) maintain such records relating to each of REMIC I, REMIC II and REMIC III as may be necessary to prepare the foregoing returns, schedules, - 103 - statements or information, such records, for federal income tax purposes, to be maintained on a calendar year and on an accrual basis. The Holder of the largest Percentage Interest in the Class R-I, Class R-II or Class R-III Certificates shall be the tax matters person of REMIC I, REMIC II or REMIC III, respectively, pursuant to Treasury Regulations Section 1.860F-4(d). If more than one Holder should hold an equal Percentage Interest in the Class R-I, Class R-II or Class R-III Certificates larger than that held by any other Holder, the first such Holder to have acquired such Class R-I, Class R-II or Class R-III 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 REMIC I, REMIC II and REMIC III, and each Holder of a Percentage Interest in the Class R-I, Class R-II or Class R-III Certificates, by acceptance hereof, is deemed to have consented to the Trustee's appointment in such capacity and agrees to execute any documents required to give effect thereto, and any fees and expenses incurred by the Trustee in connection 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 REMIC I, REMIC II or REMIC III or the imposition of tax on REMIC I, REMIC II or REMIC III (other than a tax on income expressly permitted or contemplated to be received by the terms of this Agreement). Notwithstanding any provision of this paragraph to the contrary, the Trustee shall not be required to take any action that the Trustee in good faith believes to be inconsistent with any other provision of this Agreement, nor shall the Trustee be deemed in violation of this paragraph if it takes any action expressly required or authorized by any other provision of this Agreement, and the Trustee shall have no responsibility or liability with respect to any act or omission of the Depositor, the Master Servicer or the Special Servicer which does not enable the Trustee to comply with any of clauses (i) through (vi) of the fifth preceding sentence or which results in any action contemplated by clauses (i) or (ii) of the next succeeding sentence. In this regard the Trustee shall (i) exercise reasonable care not to allow the occurrence of any "prohibited transactions" within the meaning of Code Section 860F(a), unless the party seeking such action shall have delivered to the Trustee an Opinion of Counsel (at such party's expense) that such occurrence would not (A) result in a taxable gain, (B) otherwise subject REMIC I, REMIC II or REMIC III to tax (other than a tax at the highest marginal corporate tax rate on net income from foreclosure property), or (C) cause any of REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC; and (ii) exercise reasonable care not to allow the Trust Fund to receive income from the performance of services or from assets not permitted under the REMIC Provisions to be held by a REMIC (PROVIDED, HOWEVER, that the receipt of any income expressly permitted or contemplated by the terms of this Agreement shall not be deemed to violate this clause). None of the Master Servicer, the Special Servicer and the Depositor shall be responsible or liable (except in connection with any act or omission referred to in the two preceding sentences) for any failure by the Trustee to comply with the provisions of this Section 4.04. The Depositor, the Master Servicer and the Special Servicer shall cooperate in a timely manner with the Trustee in supplying any information within the Depositor's, the Master Servicer's or the Special Servicer's control that is reasonably necessary to enable the Trustee to perform its duties under this Section 4.04. (b) The following assumptions are to be used for purposes of determining the anticipated payments of principal and interest for calculating the original yield to maturity and original issue discount with respect to the 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, - 104 - PROVIDED that the Mortgage Loans in the aggregate will prepay in accordance with the Prepayment Assumption; (ii) none of the Master Servicer, the Special Servicer, the Holders of an aggregate Percentage Interest in excess of 50% of the Most Subordinate Class of Certificates and the Class R-I Certificateholders will exercise the right described in Section 9.01 of this Agreement to cause early termination of the Trust Fund; and (iii) no Mortgage Loan is repurchased by any Seller pursuant to Article II hereof. (c) Upon termination of each REMIC the Trustee shall attach the statement described in Treasury Regulation 1.860F-1 to the final Form 1066 filed with the IRS for such REMIC. SECTION 4.05 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 REMIC I, REMIC II or REMIC III, 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 the REO Property (and until such taxes are paid, the Special Servicer from time to time shall withdraw from the REO Account and transfer to the Trustee amounts reasonably determined by the Trustee to be necessary to pay such taxes, which the Trustee shall maintain in a separate, non-interest-bearing account, and the Trustee shall deposit in the Collection Account the excess determined by the Trustee from time to time of the amount in such account over the amount necessary to pay such taxes) and shall be paid therefrom; PROVIDED that any such tax imposed on net income from foreclosure property that exceeds the amount in any such reserve shall be retained from the Available Distribution Amount as provided in Section 3.06(ix) and the next sentence. Except as provided in the preceding sentence, the Trustee is hereby authorized to and shall retain or cause to be retained from the Available Distribution Amount sufficient funds to pay or provide for the payment of, and to actually pay, such tax as is legally owed by REMIC I, REMIC II or REMIC III (but such authorization shall not prevent the Trustee from contesting, at the expense of the Trust Fund, any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The Trustee is hereby authorized to and shall segregate or cause to be segregated, into a separate non-interest bearing account, (i) the net income from any "prohibited transaction" under Code Section 860F(a) or (ii) the amount of any contribution to REMIC I, REMIC II or REMIC III after the Startup Day that is subject to tax under Code Section 860G(d) and use such income or amount, to the extent necessary, to pay such tax (and return the balance thereof, if any, to the Collection Account). To the extent that any such tax is paid to the Internal Revenue Service, the Trustee shall retain an equal amount from future amounts otherwise distributable to the Holders of the Class R-I, Class R-II or the Class R-III Certificates as the case may be, and shall distribute such retained amounts to the Holders of REMIC III Certificates (other than the Class R-III) Regular Interests, as applicable, until they are fully reimbursed and then to the Holders of the Class R-I, Class R-II Certificates or the Class R-III Certificates, as applicable. None of the Master Servicer, any subservicer, the Special Servicer or the Trustee shall be responsible for any taxes imposed on REMIC I, REMIC II or REMIC III except to the extent such tax is attributable to a breach of a representation or warranty of the Master Servicer, any subservicer, the Special Servicer or the Trustee or an act or omission of the Master Servicer, any subservicer, the Special Servicer or the - 105 - Trustee in contravention of this Agreement in both cases, PROVIDED, FURTHER, that such breach, act or omission could result in liability under Section 6.03, in the case of the Master Servicer or the Special Servicer or Section 4.04 or Section 8.01, in the case of the Trustee. Notwithstanding anything in this Agreement to the contrary, in each such case, the Master Servicer, any subservicer or 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 Master Servicer, any subservicer or the Special Servicer. SECTION 4.06 REMITTANCES; P&I ADVANCES. (a) On each Remittance Date, the Master Servicer shall (1) withdraw from the Collection Account and remit to the Trustee, by wire transfer of immediately available funds to the Certificate Account, all amounts on deposit in the Collection Account as of the close of business on the Determination Date prior to such Remittance Date; minus: (i) any permitted charges against or withdrawals from the Collection Account pursuant to clauses (ii) through (xi) of Section 3.06 hereof; and (ii) any amounts on deposit in the Collection Account representing a Monthly Payment due on a Due Date following the Collection Period for such Determination Date net of any reduction in the aggregate amount of P&I Advances for such Determination Date pursuant to Section 4.06(c) (which amounts shall be remitted pursuant to this Agreement on the Remittance Date immediately following the Collection Period in which such Monthly Payment was due). and (2) remit to the Trustee any P&I Advances required to be made on or prior to such Remittance Date pursuant to Section 4.06(b). (b) To the extent that as of the Determination Date for any month, the full amount of the Monthly Payment due in such month with respect to any Mortgage Loan has not been received by the Master Servicer, the Master Servicer shall remit to the Trustee on the Remittance Date for deposit into the Certificate Account, a P&I Advance in an amount equal to the excess of such Monthly Payment (net of any Escrow Payment component and the Servicing Fee relating to such Mortgage Loan) over the amount received; PROVIDED, HOWEVER, that: (i) the Master Servicer shall not be required to make a Nonrecoverable Advance; (ii) the Master Servicer shall not be required to advance the full amount of any Balloon Payment not made by the related Mortgagor; to the extent the Master Servicer is required to make a P&I Advance on and after the Due Date for such Balloon Payment, such P&I Advance shall not exceed an amount equal to the Assumed Monthly Payment with respect to such Mortgage Loan; (iii) with respect to any Mortgage Loan subject to a Collateral Value Adjustment, the amount of each required P&I Advance shall not exceed the product of (x) the Remittance Rate for such Mortgage Loan and (y) the Adjusted Collateral Value of such Mortgage Loan. - 106 - (c) If the Master Servicer determines that a P&I Advance is required, it shall on or prior to the related Remittance Date deposit in the related Collection Account out of its own funds an amount equal to the P&I Advance; PROVIDED, HOWEVER, that the aggregate amount of such P&I Advances for any Determination Date shall be reduced by any amounts being held for future remittance to the Master Servicer pursuant to Section 4.06(a)(1)(ii). Any funds being held in the Collection Account for future distribution and so used shall be replaced by the related Master Servicer from its own funds by deposit in the Collection Account on or before any future Remittance Date to the extent that funds in the Collection Account on such Remittance Date shall be less than payments to the Trustee required to be made on such date. (d) If the Master Servicer determines with respect to any Mortgage Loan that a P&I Advance, if made, would constitute a Nonrecoverable Advance or that it has made a Nonrecoverable Advance, it shall deliver to the Trustee a Nonrecoverable Advance Certificate. (e) If as of 11:00 a.m., New York City time, on any Distribution Date the Master Servicer shall not have made the P&I Advance required to have been made on the related Remittance Date pursuant to Section 4.06(a), the Trustee shall immediately notify the Fiscal Agent by telephone promptly confirmed in writing, and the Trustee shall no later than 12:00 noon, New York City time, on such Business Day deposit into the Certificate Account in immediately available funds an amount equal to the P&I Advances otherwise required to have been made by the Master Servicer. If the Trustee fails to make any P&I Advance required to be made under this Section 4.06, the Fiscal Agent shall make such P&I Advance not later than 2:00 p.m., New York City time, on such Business Day and, thereby, the Trustee shall not be in default under this Agreement. (f) Neither the Trustee nor the Fiscal Agent shall be obligated to make a P&I Advance which is otherwise required to be made by this Section 4.06 if the Trustee or 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 Master Servicer, as set forth in the applicable Nonrecoverable Advance Certificate, that a P&I Advance, if made, would be a Nonrecoverable Advance (and with respect to a P&I Advance, the Trustee or the Fiscal Agent, as applicable, shall rely on the Master Servicer's determination that the Advance would be a Nonrecoverable Advance if the Trustee or Fiscal Agent, as applicable, determines that it does not have sufficient time to make such determination); PROVIDED, HOWEVER, that if the Master Servicer has failed to make a P&I Advance for reasons other than a determination by the Master Servicer that such Advance would be a Nonrecoverable Advance, the Trustee or Fiscal Agent, as applicable, shall make such advance within the time periods required by Section 4.06(g) unless the Trustee or the Fiscal Agent, in good faith, makes a determination prior to the times specified in Section 4.06(g) that such advance would be a Nonrecoverable Advance. The Trustee and the Fiscal Agent, in determining whether or not an Advance previously made is, or a proposed Advance, if made, would be, a Nonrecoverable Advance shall be subject to the standards applicable to the Master Servicer hereunder. (g) The Master Servicer, the Trustee or the Fiscal Agent, as applicable, shall be entitled to the reimbursement of P&I Advances it makes to the extent permitted pursuant to Section 3.06(ii) of this Agreement together with any related Advance Interest Amount in respect of such P&I Advances to the extent permitted pursuant to Sections 3.06(ii) and (iii) and the Master Servicer and - 107 - Special Servicer hereby covenant and agree to promptly seek and effect the reimbursement of such Advances from the related Mortgagors to the extent permitted by applicable law and the related Mortgage Loan. (h) The Master Servicer shall determine on each Business Day whether amounts are available in the Collection Account to reimburse the Trustee, the Fiscal Agent and itself for unreimbursed Advances made pursuant to this Agreement. The Master Servicer shall withdraw all amounts necessary to make such reimbursement to the extent such withdrawals are permitted under Section 3.06(ii) and (iii) or Section 3.04(b)(ii), and shall reimburse the Trustee, the Fiscal Agent and itself, in that order, on each Business Day. (i) Any failure of the Master Servicer to make an Advance as required under this Agreement will constitute an event of default hereunder, in which case the Trustee will be obligated to make any required Advance, in accordance with the terms of this Agreement. SECTION 4.07 ALLOCATIONS OF REALIZED LOSSES AND COLLATERAL VALUE ADJUSTMENTS. (a) REMIC III. Prior to each Distribution Date, the Master Servicer shall determine and communicate to the Trustee the total amount of Realized Losses and Collateral Value Adjustments, if any, that resulted during the related Collection Period. As soon as practicable following the occurrence of a Collateral Value Adjustment Event with respect to any Mortgage Loan and receipt of the information described in the next sentence, the Master Servicer shall make a Collateral Value Adjustment determination with respect to such Mortgage Loan. As soon as practicable following a Collateral Value Adjustment Event or an event giving rise to a Realized Loss, and in no event later than the Determination Date in the related Prepayment Period, the Special Servicer shall provide to the Master Servicer an Officer's Certificate setting forth the amount of Net Liquidation Proceeds or other proceeds received during such Prepayment Period, any Deficient Valuation or portion of principal of such Mortgage Loan permanently forgiven during such Prepayment Period, or the appraised value of the Mortgaged Property, as applicable. The amount of each Realized Loss or Collateral Value Adjustment shall be evidenced by an Officers' Certificate of the Master Servicer. All Realized Losses and Collateral Value Adjustments shall be allocated by the Trustee as follows in reduction of the related Class Balance; PROVIDED, HOWEVER, that a Collateral Value Adjustment shall result in a reduction of the Class Balance of any Class solely for the purpose of determining Voting Rights of Holders of various Classes, and a permanent reduction of the Class Balance of any Class pursuant hereto shall result only upon the occurrence of a Realized Loss: first, to the Class L Certificates until the Class Balance thereof has been reduced to zero; second, to the Class K Certificates until the Class Balance thereof has been reduced to zero; third, to the Class J Certificates until the Class Balance thereof has been reduced to zero; fourth, to the Class H Certificates until the Class Balance thereof has been reduced to zero; fifth, to the Class G Certificates until the Class Balance thereof has been reduced to zero; sixth, to the Class F Certificates until the Class Balance thereof has been reduced to zero; seventh, to the Class E Certificates until the Class Balance thereof has been reduced to zero; eighth, to the Class D Certificates until the Class Balance thereof has been reduced to zero; ninth, to the Class C Certificates until the Class Balance thereof has been reduced to zero; tenth, to the Class B Certificates until the Class Balance thereof has been reduced to zero; and the remainder of such Realized Losses and Collateral Value Adjustments to the Class Al, Class A2 and Class A3 Certificates, pro rata, until their respective Class Balances have been reduced - 108 - to zero. Amounts allocated to reduce the related Class Balance will also reduce such Class' Voting Rights in proportion to the other Classes of Certificates. (b) REMIC II. On each Distribution Date, all Realized Losses on the REMIC I Regular Interests for such Distribution Date (or for prior Distribution Dates, to the extent not previously allocated) shall be allocated to the Corresponding REMIC II Regular Interests in the amounts and in the manner as will be allocated to the REMIC III Certificates relating thereto pursuant to Section 4.07(a). (c) REMIC I. On each Distribution Date, Realized Losses on each Mortgage Loan realized during the related Due Period shall reduce the Class Balance of the Corresponding REMIC I Regular Interest. SECTION 4.08 REMIC I. (a) On each Distribution Date, the Trustee shall be deemed to distribute to itself, as holder of the REMIC I Regular Interests, for the following purposes and in the following order of priority: (i) from the portion of the Available Distribution Amount for such Distribution Date attributable to interest collected or deemed collected on or with respect to each Mortgage Loan or REO Property, the applicable Interest Distribution Amount to each Corresponding REMIC I Regular Interest; (ii) from the portion of the Available Distribution Amount attributable to principal collected or deemed collected on or with respect to each Mortgage Loan or REO Property, principal to the Corresponding REMIC I Regular Interest, until the Certificate Principal Amount thereof is reduced to zero; (iii) any remaining funds, to reimburse any Realized Losses previously allocated first, to the REMIC I Regular Interest related to the Mortgage Loan from which such funds are derived and then to any other REMIC I Regular Interest; and (iv) thereafter, to the Class R-I Certificateholders. SECTION 4.09 REMIC II. (a) On each Distribution Date, the Trustee shall be deemed to distribute to itself, as holder of the REMIC II Regular Interests, from amounts deemed received on the REMIC I Regular Interests, for the following purposes and in the following order of priority: (i) an amount equal to the Interest Distribution Amount for the Class A1 Certificates, Class A2 Certificates, Class A3 Certificates and Class X Certificates to REMIC II Regular Interest A-1, REMIC II Regular Interest A-2, REMIC II Regular Interest A-3, REMIC II Regular Interest B, REMIC II Regular Interest C, REMIC II Regular Interest D, REMIC II Regular Interest E, REMIC II Regular Interest F, REMIC II Regular Interest G, - 109 - REMIC II Regular Interest H, REMIC II Regular Interest J, REMIC II Regular Interest K, and REMIC II Regular Interest L, each for such Distribution Date divided among such REMIC II Regular Interests in proportion to (a) in the case of the REMIC II Regular Interest A-1, REMIC II Regular Interest A-2 and REMIC II Regular Interest A-3, the Interest Accrual Amount for such Interest for such Distribution Date and (b) in the case of REMIC II Regular Interest B, REMIC II Regular Interest C, REMIC II Regular Interest D, REMIC II Regular Interest E, REMIC II Regular Interest F, REMIC II Regular Interest G, REMIC II Regular Interest H, REMIC II Regular Interest J, REMIC II Regular Interest K, and REMIC II Regular Interest L, the product of the Class Balance of such Interest and one-twelfth of the Component Strip Rate for the Corresponding Certificate, plus the amount of any unpaid portion of the respective Interest Distribution Amounts allocated under this clause (i) on prior Distribution Dates but remaining unpaid, together with interest thereon at the applicable Pass-Through Rate; (ii) to REMIC II Regular Interest A-1, the Principal Distribution Amount for such Distribution Date, until the Class Balance of the REMIC II Regular Interest A-1 has been reduced to zero; (iii) upon payment in full of the Class Balance of the REMIC II Regular Interest A-1, to the REMIC II Regular Interest A-2, the Principal Distribution Amount for such Distribution Date (reduced by any portion thereof deemed to be distributed to the REMIC II Regular Interest A-1), until the Class Balance of the REMIC II Regular Interest A-2 has been reduced to zero; (iv) upon payment in full of the Class Balance of the REMIC II Regular Interest A-2, to the REMIC II Regular Interest A-3, the Principal Distribution Amount for such Distribution Date (reduced by any portion thereof deemed to be distributed to the REMIC II Regular Interest A-1 and REMIC II Regular Interest A-2), until the Class Balance of the REMIC II Regular Interest A-3 has been reduced to zero; (v) subject to the proviso in clause (vii) below, and to the extent not paid pursuant to clause (i) above, an amount equal to the respective Interest Distribution Amount for such Distribution Date for the Class of REMIC II Regular Interests then outstanding with the highest priority for interest payment as set forth below, plus the amount of any unpaid portion of the respective Interest Distribution Amount allocated under this clause (v) on prior Distribution Dates but remaining unpaid, together with interest thereon at the applicable Pass-Through Rate; (vi) subject to the proviso in clause (vii) below, to distributions of principal equal to the remaining Principal Distribution Amount to the Classes of REMIC II Regular Interests then outstanding in the order set forth below; (vii) sequentially, to distributions of interest to the remaining REMIC II Regular Interests in the priority set forth below in an amount equal to the Interest Distribution Amounts in respect thereof for such Distribution Date and any unpaid portion of respective Interest Distribution Amounts in respect thereof for any prior Distribution Date together with - 110 - interest thereon at the applicable Pass-Through Rate, PROVIDED that on any Distribution Date on which the Class Balance of a Class of REMIC II Regular Interests is reduced to zero pursuant to clause (vi) above, interest distributions pursuant to clause (v) above will be made to the Class of Certificates outstanding with the next highest priority for interest payments prior to making distributions of principal on such Class pursuant to clause (vi) above; (viii) sequentially to the Classes of REMIC II Regular Interests in the order set forth below for distribution of principal any amounts recovered representing Realized Losses previously allocated to such Class in reduction of its Class Balance; and (ix) to distributions to the Class R-II Certificateholders, in an amount equal to the balance, if any. The priority for interest payments for purposes of clauses (v) and (vii) above, is: first, to distributions of remaining interest on the REMIC II Regular Interest B; second, to distributions of remaining interest on the REMIC II Regular Interest C; third, to distributions of remaining interest on the REMIC II Regular Interest D; fourth, to distributions of remaining interest on the REMIC II Regular Interest E; fifth, to distributions of remaining interest on the REMIC II Regular Interest F; and then sequentially to the REMIC II Regular Interest G, REMIC II Regular Interest, REMIC II Regular Interest, REMIC II Regular Interest and REMIC II Regular Interest L up to their respective Interest Distribution Amounts. The Principal Distribution Amount for such Distribution Date set forth in clause (vii) above will be applied to the payment of principal of the REMIC II Regular Interest B, REMIC II Regular Interest, REMIC II Regular Interest D, REMIC II Regular Interest E, REMIC II Regular Interest F, REMIC II Regular Interest G, REMIC II Regular Interest H, REMIC II Regular Interest J, REMIC II Regular Interest K and REMIC II Regular Interest L, in that order, until their respective Class Balances have been reduced to zero; PROVIDED, that notwithstanding clauses (ii), (iii) and (iv) above on and after any Distribution Date as of which the REMIC II Regular Interests B has been reduced to zero, the Principal Distribution Amount shall be applied to payments of principal of the REMIC II Regular Interests A-1, REMIC II Regular Interests A-2 and REMIC II Regular Interests A-3, pro rata, based on their respective Class Balances. SECTION 4.10 PREPAYMENT PREMIUMS. On each Distribution Date, the Trustee shall be deemed to distribute to itself, as holder of the REMIC I Regular Interests, any Prepayment Premiums and Yield Maintenance Charges collected on or with respect to the Mortgage Loans. On each Distribution Date, the Trustee shall be deemed to distribute to itself, as holder of the REMIC II Regular Interests, any Prepayments Premiums and Yield Maintenance Charges deemed distributed to the REMIC I Regular Interests, to be deemed distributed to the Corresponding REMIC II Regular Interests in the amounts and in the manner as will be distributed to the REMIC Regular Certificates pursuant to Section 4.01(a)(i) and (ii). - 111 - ARTICLE V THE CERTIFICATES SECTION 5.01 THE CERTIFICATES. (a) The Certificates will be substantially in the respective forms annexed hereto as Exhibits. The Class A1, Class A2, Class A3, Class B, Class C, Class D, Class E, Class F, Class X, Class G, Class H, Class J, Class K and Class L Certificates will be issuable only in minimum denominations (based on the respective Class Balance of each Class on the first Distribution Date or Notional Amounts) corresponding to initial Class Balances or Notional Amounts on the first Distribution Date, in the case of the Offered Certificates, of not less than $10,000, and in the case of the other Certificates other than the Class R-I, Class R-III, and Class R-III Certificates, of not less than $100,000, and in each case in integral multiples of $1000 in excess thereof. Only one Class R-I, one Class R-II and one Class R-III Certificate may be issued and shall be issued only as Definitive Certificates. (b) The Certificates shall be executed by manual or facsimile signature on behalf of the Trustee in its capacity as trustee hereunder by an authorized officer under its seal imprinted thereon. Certificates bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Trustee shall bind the Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Certificates or did not hold such offices at the date of such Certificates. No Certificate shall be entitled to any benefit under this Agreement, or be valid for any purpose, unless there appears on such Certificate a certificate of authentication substantially in the form provided for herein executed by the Authenticating Agent by manual signature, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. (c) The Class A1, Class A2, Class A3, Class B, Class C, Class D, Class E, Class F, Class X, Class G, Class H, Class J, Class K and Class L Certificates shall initially be issued as one or more Certificates registered in the name of the Depository or its nominee and, except as provided below, registration of such Certificates may not be transferred by the Trustee except to another Depository that agrees to hold such Certificates for the respective Beneficial Owners with Ownership Interests therein. The Beneficial Owners shall hold their respective Ownership Interests in and to each of the referenced herein Certificates (except for such remainders) through the book-entry facilities of the Depository and, except as provided below, shall not be entitled to Definitive Certificates in respect of such Ownership Interests. All transfers by Beneficial Owners of their respective Ownership Interests in the Book-Entry Certificates shall be made in accordance with the procedures established by the Depository Participant or brokerage firm representing such Beneficial Owner. Each Depository Participant shall transfer the Ownership Interests only in the Book-Entry Certificates of Beneficial Owners it represents or of brokerage firms for which it acts as agent in accordance with the Depository's normal procedures. The Trustee, the Master Servicer, the Special Servicer and the Depositor may for all purposes (including the making of payments due on the respective Classes of Book-Entry Certificates) deal - 112 - with the Depository as the authorized representative of the Beneficial Owners with respect to the respective Classes of Book-Entry Certificates for the purposes of exercising the rights of Certificateholders hereunder. The rights of Beneficial Owners with respect to the respective Classes of Book-Entry Certificates shall be limited to those established by law and agreements between such Beneficial Owners and the Depository Participants and brokerage firms representing such Beneficial Owners. Multiple requests and directions from, and votes of, the Depository as Holder of any Class of Book-Entry Certificates with respect to any particular matter shall not be deemed inconsistent if they are made with respect to different Beneficial Owners. The Trustee may establish a reasonable record date in connection with solicitations of consents from or voting by Certificateholders and shall give notice to the Depository of such record date. If (i) (A) the Depositor advises the Trustee in writing that the Depository is no longer willing or able to properly discharge its responsibilities as Depository and (B) the Depositor is unable to locate a qualified successor or (ii) the Depositor at its option advises the Trustee in writing that it elects to terminate the book-entry system through the Depository, the Trustee shall notify all Beneficial Owners, through the Depository, of the occurrence of any such event and of the availability of Definitive Certificates to Beneficial Owners representing the same. In addition, upon written request, the Trustee will issue Definitive Certificates in exchange for Ownership Interests in like Class Balances or Notional Amounts of the Book-Entry Certificates for the Class X, Class G, Class H, Class J, Class K and Class L Certificates in connection with a transfer permitted pursuant to Section 5.02(b)(ii). Upon surrender to the Trustee of the Book-Entry Certificates by the Depository (or, in the case of a transfer described in the preceding sentence, instructions from the Depository confirming the writedown of the Global Certificate by the Percentage Interest to be issued as a Definitive Certificate), accompanied by registration instructions from the Depository for registration of transfer, the Trustee shall issue the Definitive Certificates. Upon surrender to the Trustee of a Definitive Certificate for a Class X, Class G, Class H, Class J, Class K or Class L Certificate by the Holder thereof, accompanied by registration instructions from such Holder for registration of such Certificate as a Book-Entry Certificate, the Trustee shall direct the Depository concerning re-registration of such Certificate as a Book-Entry Certificate. Neither the Depositor, the Master Servicer, the Special Servicer nor the Trustee shall be liable for any actions taken by the Depository or its nominee, including, without limitation, any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Certificates all references herein to obligations imposed upon or to be performed by the Depository in connection with the issuance of the Definitive Certificates pursuant to this Section 5.01 shall be deemed to be imposed upon and performed by the Trustee, and the Trustee, the Master Servicer and the Special Servicer shall recognize the Holders of the Definitive Certificates as Certificateholders hereunder. Any Holder requesting issuance of a Definitive Certificate, or re-registration of a Definitive Certificate as a Book-Entry Certificate, will be required to pay any processing or transfer charges of the Depository and any tax or governmental charges imposed in connection with such transfer. SECTION 5.02 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES. (a) At all times during the term of this Agreement, there shall be maintained at the office of the Certificate Registrar a Certificate Register in which, subject to such reasonable regulations as the Certificate Registrar may prescribe, the Certificate Registrar shall provide for the registration of - 113 - Certificates and of transfers and exchanges of Certificates as herein provided. The Trustee is hereby initially appointed (and hereby agrees to act) as Certificate Registrar for the purpose of registering Certificates and transfers and exchanges of Certificates as herein provided. The Certificate Registrar may appoint, by a written instrument delivered to the Trustee, any other bank or trust company to act as Certificate Registrar under such conditions as the predecessor Certificate Registrar may prescribe, PROVIDED that the predecessor Certificate Registrar shall not be relieved of any of its duties or responsibilities hereunder by reason of such appointment. The Master Servicer and Special Servicer shall have the right to inspect the Certificate Register or to obtain a copy thereof at all reasonable times, and to rely conclusively upon a certificate of the Certificate Registrar as to the information set forth in the Certificate Register. (b) No transfer of any Class X, Class G, Class H, Class J, Class K, Class L, Class R-I, Class R-II and Class R-III Certificate shall be made unless that transfer is made pursuant to an effective registration statement under the Act, and effective registration or qualification under applicable state securities laws, or is made in a transaction which does not require such registration or qualification. If such a transfer is to be made without registration or qualification and is to be made in connection with the issuance or transfer of a Definitive Certificate, then the Certificate Registrar shall require, in order to assure compliance with such laws, receipt of, if such transfer is purportedly being made in reliance upon Rule 144A under the Act, a certificate from the prospective transferee substantially in the form attached as EXHIBIT D hereto. Absent receipt of such certificate, such transfer shall be made only by the Initial Purchaser as transferor, or otherwise only after the expiration of two years following the Closing Date. Any transferee from the Initial Purchaser not purchasing in reliance on Rule 144A under the Act shall furnish to the Certificate Registrar a certificate in the form attached as EXHIBIT E hereto. None of the Depositor, the Trustee or the Certificate Registrar is obligated to register or qualify the Class X, Class G, Class H, Class K, Class L, Class R-I, Class R-II and Class R-III Certificates under the Act or any other securities law or to take any action not otherwise required under this Agreement to permit the transfer of any Class X, Class F, Class G, Class H, Class J, Class K, Class L, Class R-I, Class R-II and Class R-III Certificate without registration or qualification. Any Class X, Class G, Class H, Class J, Class K, Class L, Class R-I, Class R-II or Class R-III Certificateholder desiring to effect such a transfer shall, and does hereby agree to, indemnify the Trustee, the Certificate Registrar and the Depositor against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. (c) None of the Certificates except for the Class A1, Class A2, Class A3 or Class X Certificates or any interest therein shall be transferred to (A) any employee benefit plan or other retirement arrangement, including individual retirement accounts and annuities, Keogh plans and collective investment funds and separate accounts in which such plans, accounts or arrangements are invested, that is subject to ERISA, or the Code (each, a "PLAN") or (B) any Person who is directly or indirectly purchasing any such Class or interest therein on behalf of, as named fiduciary of, as trustee of, or with assets of a Plan, unless the prospective transferee provides the Certificate Registrar with a certification of facts and an Opinion of Counsel which establish to the satisfaction of the Certificate Registrar that such transfer will not result in a violation of Section 406 of ERISA or Section 4975 of the Code or cause the Master Servicer, the Special Servicer or the Trustee to be deemed a fiduciary of such Plan or result in the imposition of an excise tax under Section 4975 of the Code. In the absence of its having received the certification and Opinion of Counsel - 114 - contemplated by the preceding sentence, the Certificate Registrar shall require the prospective transferee of any Class G, Class H, Class J, Class R-I, Class R-II or Class R-III Certificate to certify, and each prospective transferee of any Class B, Class C, Class D, Class E or Class F Certificate shall be deemed to have represented by its acquisition of such Certificate, that it is neither (A) a Plan nor (B) a Person who is directly or indirectly purchasing any such Class Certificates on behalf of, as named fiduciary of, as trustee of, or with assets of a Plan. (d) No transfer of any Residual Certificate shall be made to a Non-U.S. Person. Notwithstanding anything to the contrary contained herein, prior to registration of any transfer, sale or other disposition of a Residual Certificate, the Certificate Registrar shall have received (i) an affidavit from the proposed transferee substantially in the form attached as EXHIBIT F-1 hereto, to the effect that, among other things, (A) such transferee is not a Disqualified Organization or an agent (including a broker, nominee or middleman) of a Disqualified Organization, (B) such transferee is not a Non-U.S. Person, (C) such transferee has no present knowledge or expectation that it will become insolvent or subject to a bankruptcy proceeding for so long as the Residual Certificate remains outstanding, and (D) no purpose of such proposed transfer, sale or other disposition of the Residual Certificate is or will be to impede the assessment or collection of any tax, and (ii) a certificate from the transferor substantially in the form attached as EXHIBIT F-2 hereto, to the effect that, among other things, no purpose of such proposed transfer, sale or other disposition of the Residual Certificate is or will be to impede the assessment or collection of any tax. Notwithstanding the registration in the Certificate Register of any transfer, sale or other disposition of a Residual Certificate to a Disqualified Organization or an agent (including a broker, nominee or middleman) of a Disqualified Organization or to a Non-U.S. Person, such registration shall be deemed to be of no legal force or effect whatsoever and such Person shall not be deemed to be a Certificateholder for any purpose hereunder, including, but not limited to, the receipt of distributions in respect of such Residual Certificate. If any purported transfer of a Residual Certificate shall be in violation of the provisions of this Section 5.02(d), then the prior Holder of the Residual Certificate purportedly transferred shall, upon discovery that the transfer of such Residual Certificate was not in fact permitted by this Section 5.02(d), be restored to all rights as Holder thereof retroactive to the date of the purported transfer. The Trustee shall be under no liability to any Person for any registration of transfer of a Residual Certificate that is not permitted by this Section 5.02(d) or for making payments due on such Residual Certificate to the purported Holder thereof or taking any other action with respect to such purported Holder under the provisions of this Agreement. The prior Holder shall be entitled to recover from any purported Holder of a Residual Certificate that was in fact not a permitted transferee under this Section 5.02(d) at the time it became a Holder all payments made on such Residual Certificate. The Holder of Residual Certificates, by its acceptance thereof, shall be deemed for all purposes to have consented to the provisions of this Section 5.02 and to any amendment of this Agreement deemed necessary by counsel of the Depositor to ensure that the transfer of a Residual Certificate to a Disqualified Organization or any other Person will not cause any REMIC in the Trust Fund to cease to qualify as a REMIC or cause the imposition of a tax upon the Trust Fund or any REMIC therein. (e) Subject to the preceding subsections, upon surrender for registration of transfer of any Certificate at the office of the Certificate Registrar, the Trustee or the Authenticating Agent shall execute and authenticate and the Certificate Registrar shall deliver, in the name of the designated - 115 - transferee or transferees, one or more new Certificates of the same Class of a like aggregate Percentage Interest. (f) At the option of any Holder, its Certificates may be exchanged for other Certificates of authorized denominations of the same Class of a like aggregate Percentage Interest, upon surrender of the Certificates to be exchanged at the office of the Certificate Registrar. Whenever any Certificates are so surrendered for exchange the Trustee or the Authenticating Agent shall execute and authenticate and the Certificate Registrar shall deliver the Certificates which the Certificateholder making the exchange is entitled to receive. (g) Every Certificate presented or surrendered for transfer or exchange shall (if so required by the Certificate Registrar) be duly endorsed by, or be accompanied by a written instrument of transfer in the form satisfactory to the Certificate Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing. (h) No service charge shall be imposed for any transfer or exchange of Certificates, but the Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Certificates. (i) All Certificates surrendered for transfer and exchange shall be physically canceled by the Certificate Registrar and a certificate of such cancellation shall be delivered to the Trustee by the Certificate Registrar. The Certificate Registrar shall hold such canceled Certificates in accordance with its standard procedures. SECTION 5.03 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If (i) any mutilated Certificate is surrendered to the Certificate Registrar, or the Certificate Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and (ii) there is delivered to the Trustee and the Certificate Registrar such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Trustee or the Certificate Registrar that such Certificate has been acquired by a bona fide purchaser, the Trustee or the Authenticating Agent shall execute and authenticate and the Certificate Registrar shall deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of the same Class and like Percentage Interest. Upon the issuance of any new Certificate under this Section, the Trustee and the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Certificate Registrar) connected therewith. Any replacement Certificate issued pursuant to this Section shall constitute complete and indefeasible evidence of ownership in the Trust Fund, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. - 116 - SECTION 5.04 PERSONS DEEMED OWNERS. The Depositor, the Master Servicer, the Special Servicer, the Trustee, the Fiscal Agent, the Certificate Registrar and any agent of any of them may treat the person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 4.01 and for all other purposes whatsoever, and none of the Depositor, the Master Servicer, the Special Servicer, the Trustee, the Fiscal Agent, the Certificate Registrar or any agent of any of them shall be affected by notice to the contrary. ARTICLE VI THE DEPOSITOR, THE MASTER SERVICER AND THE SPECIAL SERVICER SECTION 6.01 LIABILITY OF THE DEPOSITOR, THE MASTER SERVICER AND THE SPECIAL SERVICER. The Depositor, the Master 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 6.02 MERGER OR CONSOLIDATION OF THE MASTER SERVICER. Subject to the following paragraph, the Master Servicer will keep in full effect its existence, rights and good standing as a corporation under the laws of the State of Texas and will not jeopardize its ability to do business in each jurisdiction in which the Mortgaged Properties are located or to protect the validity and enforceability of this Agreement, the Certificates or any of the Mortgage Loans and to perform its respective duties under this Agreement. The Master 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 Master Servicer hereunder, and shall be deemed to have assumed all of the liabilities of the Master Servicer hereunder, if each of the Rating Agencies has confirmed in writing that such merger or consolidation or transfer of assets and succession, in and of itself, will not cause a downgrade, qualification or withdrawal of the then current ratings assigned by such Rating Agency to any Class of Certificates. SECTION 6.03 LIMITATION ON LIABILITY OF THE DEPOSITOR, THE MASTER SERVICER AND OTHERS. Neither the Depositor, the Master Servicer, the Special Servicer nor any of the directors, officers, partners, employees or agents of the Depositor or the Master Servicer or the Special Servicer (or of any general partner of the foregoing) shall be under any liability to the Trust Fund, the Certificateholders or any other party hereto 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 Master Servicer or the Special Servicer or any such Person against any breach of warranties or representations made herein, or against any liability which would otherwise be imposed by reason of willful misconduct, bad faith, fraud or negligence in the performance of duties or by reason of reckless disregard of obligations or duties - 117 - hereunder. The Depositor, the Master Servicer, the Special Servicer and any director, officer, partner, employee or agent of the Depositor, the Master Servicer or the Special Servicer (or of any general partner of the foregoing) may rely in good faith on any document of any kind which, PRIMA FACIE, is properly executed and submitted by any appropriate Person respecting any matters arising hereunder. The Depositor, the Master Servicer, the Special Servicer and any director, officer, partner, employee or agent of the Depositor or the Master Servicer or the Special Servicer (or of any general partner of the foregoing) shall be indemnified and held harmless by the Trust Fund against any loss, liability or expense (including legal fees and expenses) (i) incurred in connection with or relating to this Agreement or the Certificates, other than any loss, liability or expense incurred by reason of willful misconduct, bad faith, fraud or negligence (or in the case of the Master Servicer, by reason of any specific liability imposed for a breach of the Servicing Standard) in the performance of duties hereunder or by reason of reckless disregard of obligations or duties hereunder, in each case by the Person being indemnified or (ii) imposed by any taxing authority if such loss, liability or expense is not specifically reimbursable pursuant to the terms of this Agreement. Neither the Depositor nor the Master 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, the Master Servicer or the Special Servicer may in its discretion undertake any action related to its obligations hereunder which it may deem necessary or desirable with respect to this Agreement and the rights and duties of the parties hereto and the interests of the Certificateholders hereunder. In such event, the legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust Fund, and the Depositor, the Master Servicer and the Special Servicer shall be entitled to be reimbursed therefor from the Collection Account as provided in Section 3.06 of this Agreement. SECTION 6.04 LIMITATION ON RESIGNATION OF THE MASTER SERVICER AND THE SPECIAL SERVICER; TERMINATION OF THE MASTER SERVICER AND THE SPECIAL SERVICER. (a) The Master Servicer and the Special Servicer may assign their respective rights and delegate their respective duties and obligations under this Agreement in connection with the sale or transfer of a substantial portion of their mortgage servicing or asset management portfolio, PROVIDED that: (i) the purchaser or transferee accepting such assignment and delegation (A) shall be acceptable to each Rating Agency as confirmed by a letter from each Rating Agency delivered to the Trustee that such assignment or delegation will not cause a downgrade, withdrawal or qualification of the then current ratings of the Certificates, and (B) 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 Master Servicer or Special Servicer, as applicable, under this Agreement from and after the date of such agreement; (ii) the Master Servicer or the Special Servicer shall not be released from its obligations under this Agreement that arose prior to the effective date of such assignment and delegation under this Section 6.04; and (iii) the rate at which the Servicer Compensation or Special Servicer Compensation, as applicable (or any component thereof) is calculated shall not exceed the rate then in effect. Upon acceptance of such assignment and delegation, the purchaser or transferee shall be the successor Master Servicer or Special Servicer, as applicable, hereunder. - 118 - (b) Except as provided in this Section 6.04, the Master Servicer and the Special Servicer shall not resign from their respective obligations and duties hereby imposed on them except upon determination that such duties hereunder are no longer permissible under applicable law. Any such determination permitting the resignation of the Master Servicer or the Special Servicer, as applicable, shall be evidenced by an Opinion of Counsel (obtained at the resigning Master Servicer's or Special Servicer's expense) to such effect delivered to the Trustee. (c) Certificateholders representing in the aggregate at least 51% of the Voting Rights of all Certificateholders may remove the Master Servicer or the Special Servicer upon the occurrence of a Master Servicer Event of Default or a Special Servicer Event of Default, as applicable, and upon written notice to the Master Servicer, the Special Servicer, the Depositor and the Trustee, PROVIDED that each Rating Agency has confirmed in writing that such removal and the appointment of a successor Master Servicer, a Special Servicer, as applicable, will not result in a downgrade, qualification or withdrawal of the then current ratings by such Rating Agency to any Class of Certificates. Without limiting the generality of the succeeding paragraph, no such removal shall be effective unless and until (i) the Master Servicer or the Special Servicer has been paid any unpaid Servicer Compensation or Special Servicer Compensation, as applicable, unreimbursed Advances (including Advance Interest Amounts thereon to which it is entitled) and all other amounts to which the Master Servicer or the Special Servicer is entitled hereunder to the extent such amounts accrue prior to such effective date, and (ii) the successor Master Servicer or Special Servicer has deposited into the Investment Accounts from which amounts were withdrawn to reimburse the terminated Master Servicer or Special Servicer, as applicable, an amount equal to the amounts so withdrawn, to the extent such amounts would not have been permitted to be withdrawn except pursuant to this paragraph, in which case the successor Master Servicer or Special Servicer, as applicable, shall, immediately upon deposit, have the same right of reimbursement or payment as the terminated Master Servicer or Special Servicer had immediately prior to its termination without regard to the operation of this paragraph. No resignation or removal of the Master Servicer or the Special Servicer as contemplated by the preceding paragraphs shall become effective until the Trustee or a successor Master Servicer or Special Servicer shall have assumed the Master Servicer's or the Special Servicer's responsibilities, duties, liabilities and obligations hereunder. If no successor Master Servicer or Special Servicer can be obtained to perform such obligations for the same compensation to which the terminated Master Servicer or Special Servicer would have been entitled, additional amounts payable to such successor Master Servicer or Special Servicer shall be treated as Realized Losses. SECTION 6.05 RIGHTS OF THE DEPOSITOR AND THE TRUSTEE IN RESPECT OF THE MASTER SERVICER AND THE SPECIAL SERVICER. The Master Servicer and the Special Servicer shall afford the Depositor, the Trustee and the Rating Agencies, upon reasonable notice, during normal business hours access to all records maintained by it in respect of its rights and obligations hereunder and access to its officers responsible for such obligations. The Depositor may, but is not obligated to, enforce the obligations of the Master Servicer or the Special Servicer hereunder which are in default and may, but is not obligated to, perform, or cause a designee to perform, any defaulted obligation of such Person hereunder or exercise its rights hereunder, PROVIDED that the Master Servicer and the Special Servicer - 119 - shall not be relieved of any of its obligations hereunder by virtue of such performance by the Depositor or its designee. In the event the Depositor or its designee undertakes any such action it will be reimbursed by the Trust Fund from the Collection Account as provided in Section 3.06 and Section 6.03(a) hereof to the extent not recoverable from the Master Servicer or Special Servicer, as applicable. Neither the Depositor nor the Trustee and neither the Master Servicer, with respect to the Special Servicer, nor the Special Servicer, with respect to the Master Servicer, shall have any responsibility or liability for any action or failure to act by the Master Servicer or the Special Servicer and neither such Person is obligated to monitor or supervise the performance of the Master Servicer or the Special Servicer under this Agreement or otherwise. Neither the Master Servicer nor the Special Servicer shall be under any obligation to disclose confidential or proprietary information pursuant to this Section. SECTION 6.06 MASTER SERVICER OR SPECIAL SERVICER AS OWNER OF A CERTIFICATE. The Master Servicer or an Affiliate of the Master Servicer or the Special Servicer or an Affiliate of the Special Servicer may become the Holder (or with respect to a Global Certificate, a Beneficial Owner) of any Certificate with the same rights it would have if it were not the Master Servicer or the Special Servicer or an Affiliate thereof. If, at any time during which the Master Servicer or the Special Servicer or an Affiliate of the Master Servicer or the Special Servicer is the Holder or Beneficial Owner of any Certificate, the Master Servicer or the Special Servicer proposes to take action (including for this purpose, omitting to take action) that (i) is not expressly prohibited by the terms hereof and would not, in the Master Servicer's or the Special Servicer's good faith judgment, violate the Servicing Standard or the Special Servicing Standard, as applicable, and (ii) if taken, might nonetheless, in the Master Servicer's or the Special Servicer's good faith judgment, be considered by other Persons to violate the Servicing Standard or the Special Servicing Standard, as applicable, the Master Servicer or the Special Servicer may seek the approval of the Certificateholders to such action by delivering to the Trustee a written notice that (i) states that it is delivered pursuant to this Section 6.06, (ii) identifies the Percentage Interest in each Class of Certificates beneficially owned by the Master Servicer or the Special Servicer or an Affiliate of the Master Servicer or the Special Servicer, and (iii) describes in reasonable detail the action that the Master Servicer or the Special Servicer proposes to take. The Trustee, upon receipt of such notice, shall forward it to the Certificateholders (other than the Master Servicer and its Affiliates or the Special Servicer and its Affiliates, as appropriate) together with such instructions for response as the Trustee shall reasonably determine. If at any time Certificateholders holding greater than 50% of the Voting Rights of all Certificateholders (calculated without regard to the Certificates beneficially owned by the Master Servicer or its Affiliates or the Special Servicer or its Affiliates, as appropriate) shall have consented in writing to the proposal described in the written notice, and if the Master Servicer or the Special Servicer shall act as proposed in the written notice, such action shall be deemed to comply with the Servicing Standard or the Special Servicing Standard, as applicable. The Trustee shall be entitled to reimbursement from the Master Servicer or the Special Servicer, as applicable, of the reasonable expenses of the Trustee incurred pursuant to this paragraph. It is not the intent of the foregoing provision that the Master Servicer or the Special Servicer be permitted to invoke the procedure set forth herein with respect to routine servicing matters arising hereunder, except in the case of unusual circumstances. - 120 - ARTICLE VII DEFAULT SECTION 7.01 EVENTS OF DEFAULT. (a) "MASTER SERVICER EVENT OF DEFAULT", wherever used herein, means any one of the following events: (i) provided it is not caused by FORCE MAJEURE, any failure by the Master Servicer to remit to the Collection Account or any failure by the Master Servicer to remit to the Trustee for deposit into the Certificate Account any amount required to be so deposited by the Master Servicer (including a P&I Advance) pursuant to, and at the time specified by the terms of this Agreement; or (ii) any failure on the part of the Master Servicer duly to observe or perform in any material respect any other of the covenants or agreements or the breach of any representations or warranties on the part of the Master Servicer contained in this Agreement which continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Master Servicer by the Depositor or the Trustee, or to the Master Servicer, the Depositor and the Trustee by the Holders of Certificates evidencing Percentage Interests of at least 25% of any Class affected thereby; or (iii) the Trustee shall have received written notice from either Rating Agency that the Master Servicer is no longer an approved servicer and that the continuation of the Master Servicer in such capacity would result in the downgrade, qualification or withdrawal of any rating then assigned by such Rating Agency to any Certificates, REMIC I Regular Interests or REMIC II Regular Interests (to the extent such REMIC I Regular Interests or REMIC II Regular Interests carry a rating by a Rating Agency); or (iv) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Master Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days; or (v) the Master Servicer shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Master Servicer, or of or relating to all or substantially all of its property; or (vi) the Master Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency - 121 - or reorganization statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations; or (vii) the Master Servicer shall fail to make any Property Advance required to be made by the Master Servicer hereunder (whether or not the Trustee or the Fiscal Agent makes such Advance), which failure continues unremedied for a period of fifteen (15) days after the date on which such Property Advance was first due (or for any shorter period as may be required, if applicable, to avoid any lapse in insurance coverage required under any Mortgage or this Agreement with respect to any Mortgaged Property or to avoid any foreclosure or similar action with respect to any Mortgaged Property by reason of a failure to pay real estate taxes and assessments and if the Trustee makes a required Property Advance pursuant to Section 3.24 due to the Master Servicer's failure to make a required Advance, such Event of Default shall occur immediately upon such Advance); then, and in each and every such case, unless a Master Servicer Event of Default shall have been remedied, in the case of clause (iii), (iv), (v) and (vi), the Trustee shall terminate the Master Servicer, and in the case of clauses (i), (ii) and (vii), the Trustee may, and at the written direction of the Holders of at least 25% of the aggregate Voting Rights of all Certificates shall, terminate the Master Servicer. In the event that the Master Servicer is also the Special Servicer and the Master Servicer is terminated as provided in this Section 7.01, the Master Servicer shall also be terminated as Special Servicer. (b) "SPECIAL SERVICER EVENT OF DEFAULT", wherever used herein, means any one of the following events: (i) provided it is not caused by FORCE MAJEURE, any failure by the Special Servicer to remit to the Collection Account any amount required to be so deposited by the Special Servicer pursuant to and in accordance with the terms of this Agreement; or (ii) any failure on the part of the Special Servicer duly to observe or perform in any material respect any other of the covenants or agreements or the breach of any representations or warranties on the part of the Special Servicer contained in this Agreement which continues unremedied for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Special Servicer by the Master Servicer, the Depositor or the Trustee, or to the Special Servicer, the Master Servicer, the Depositor and the Trustee by the Holders of Certificates evidencing Percentage Interests of at least 25% of any Class affected thereby; or (iii) the Trustee or Master Servicer shall have received written notice from either Rating Agency that the Special Servicer is no longer an approved servicer and that the continuation of the Special Servicer in such capacity would result in the downgrade, qualification or withdrawal of any rating then assigned by such Rating Agency to any Certificates; or - 122 - (iv) a decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state bankruptcy, insolvency or similar law for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Special Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of 60 days; or (v) the Special Servicer shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Special Servicer, or of or relating to all or substantially all of its property; or (vi) the Special Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its obligations; then, and in each and every such case, unless a Special Servicer Event of Default shall have been remedied, in the case of clauses (iii), (iv), (v) and (vi), the Trustee shall terminate the Special Servicer, and in the case of clauses (i) and (ii), the Trustee may, and at the written direction of the Holders of at least 25% of the aggregate Voting Rights of all Certificates shall, terminate the Special Servicer. (c) In the event that the Master Servicer or the Special Servicer is terminated pursuant to this Section 7.01, the Trustee (the "TERMINATING PARTY") shall, by notice in writing to the Master Servicer or the Special Servicer, as the case may be (the "TERMINATED PARTY"), terminate all of its rights and obligations under this Agreement and in and to the Mortgage Loans and the proceeds thereof, other than any rights it may have hereunder as a Certificateholder and any rights or obligations that accrued prior to the date of such termination (including the right to receive all amounts accrued or owing to it under this Agreement, plus, in the case of the Master Servicer, interest at the Advance Rate on such amounts until received to the extent such amounts bear interest as provided in this Agreement, with respect to periods prior to the date of such termination and, with respect to both the Master Servicer and the Special Servicer, the right to the benefits of Section 6.03 notwithstanding any such termination). On or after the receipt by the Terminated Party, of such written notice, all of its authority and power under this Agreement, whether with respect to the Certificates (except that the Terminated Party shall retain its rights as a Certificateholder in the event and to the extent that it is a Certificateholder) or the Mortgage Loans or otherwise, shall pass to and be vested in the Terminating Party pursuant to and under this Section and, without limitation, the Terminating Party is hereby authorized and empowered to execute and deliver, on behalf of and at the expense of the Terminated Party, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement or assignment of the Mortgage Loans and related documents, or otherwise. The Master Servicer and the Special Servicer each agree in the event it is terminated pursuant to this Section 7.01 to promptly (and in any event no later than ten Business Days subsequent to such notice) provide, at its own - 123 - expense, the Terminating Party with all documents and records requested by the Terminating Party to enable the Terminating Party to assume its functions hereunder, and to cooperate with the Terminating Party and the successor to its responsibilities hereunder in effecting the termination of its responsibilities and rights hereunder, including, without limitation, the transfer to the successor Master Servicer or Special Servicer or the Terminating Party, as applicable, for administration by it of all cash amounts which shall at the time be or should have been credited by the Master Servicer or the Special Servicer to the Collection Account, the Reserve Accounts, and any REO Account, Lock-Box Account or Cash Collateral Account thereafter be received with respect to the Mortgage Loans, and shall promptly provide the Terminating Party or such successor Master Servicer or Special Servicer (which may include the Trustee), as applicable, all documents and records reasonably requested by it, such documents and records to be provided in such form as the Terminating Party or such successor Master Servicer or Special Servicer shall reasonably request (including electromagnetic form), to enable it to assume the Master Servicer's or Special Servicer's function hereunder. All reasonable costs and expenses of the Terminating Party or the successor Master Servicer or successor Special Servicer incurred in connection with transferring the Mortgage Loan Files to the successor Master Servicer or Special Servicer and amending this Agreement to reflect such succession as successor Master Servicer or successor Special Servicer pursuant to this Section 7.01 shall be paid by the predecessor Master Servicer or the Special Servicer, as applicable, upon presentation of reasonable documentation of such costs and expenses. If the predecessor Master Servicer or Special Servicer (as the case may be) has not reimbursed the Terminating Party or the successor Master Servicer or Special Servicer for such expenses within 90 days after the presentation of reasonable documentation, such expense shall be reimbursed by the Trust Fund; PROVIDED that the Terminated Party shall not thereby be relieved of its liability for such expenses. SECTION 7.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. On and after the time the Master Servicer or the Special Servicer receives a notice of termination pursuant to Section 7.01, if the Master Servicer has been terminated, the Terminating Party shall be the successor Master Servicer, and if the Special Servicer has been terminated, the Master Servicer shall be the successor Special Servicer, in all respects in its capacity as Master Servicer or Special Servicer under this Agreement and the transactions set forth or provided for herein and, except as provided herein, shall be subject to all the responsibilities, duties, limitations on liability and liabilities relating thereto and arising thereafter placed on the Master Servicer or Special Servicer by the terms and provisions hereof; PROVIDED, HOWEVER, that (i) the Terminating Party or the Master Servicer, as applicable, shall have no responsibilities, duties, liabilities or obligations with respect to any act or omission of the Master Servicer or Special Servicer, respectively, and (ii) any failure to perform, or delay in performing, such duties or responsibilities caused by the Terminated Party's failure to provide, or delay in providing, records, tapes, disks, information or monies shall not be considered a default by such successor hereunder. The Trustee, as successor Master Servicer or the Master Servicer, as successor Special Servicer, shall be indemnified to the full extent provided the Master Servicer or Special Servicer, as applicable, under this Agreement prior to the Master Servicer's or the Special Servicer's termination. The appointment of a successor Master Servicer or successor Special Servicer shall not affect any liability of the predecessor Master Servicer or Special Servicer which may have arisen prior to its termination as Master Servicer or Special Servicer. The Terminating Party shall not be liable for any of the representations and warranties of the Master Servicer, and the Master Servicer shall not be liable for - 124 - any representations and warranties of the Special Servicer, herein or in any related document or agreement, for any acts or omissions of the predecessor Master Servicer or Special Servicer or for any losses incurred in respect of any Permitted Investment by the Master Servicer or Special Servicer pursuant to Section 3.07 hereunder, nor shall the Trustee or the Master Servicer be required to purchase any Mortgage Loan hereunder. As compensation therefor, the Terminating Party as successor Master Servicer, or the Master Servicer as successor Special Servicer shall be entitled to the Servicing Compensation or Special Servicing Compensation, as applicable, and all funds relating to the Mortgage Loans that accrue after the date of the Terminating Party's or Master Servicer's succession to which the Master Servicer or Special Servicer would have been entitled if the Master Servicer or Special Servicer, as applicable, had continued to act hereunder. In the event any Advances made by the Master Servicer and the Trustee or the Fiscal Agent shall at any time be outstanding, or any amounts of interest thereon shall be accrued and unpaid, all amounts available to repay Advances and interest hereunder shall be applied entirely to the Advances made by the Trustee or the Fiscal Agent (and the accrued and unpaid interest thereon), until such Advances and interest shall have been repaid in full. Notwithstanding the above, the Trustee may, if it shall be unwilling to so act, or shall, if it is unable to so act, or if the Holders of Certificates entitled to at least 25% of the aggregate Voting Rights so request in writing to the Trustee, or if neither the Trustee nor the Fiscal Agent is rated by each Rating Agency in one of its two highest long-term debt rating categories or if the Rating Agencies do not provide written confirmation that the succession of the Trustee, as Master Servicer, or the Master Servicer as Special Servicer, as applicable, will not cause a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates, promptly appoint, or petition a court of competent jurisdiction to appoint, any established mortgage loan servicing institution the appointment of which will not result in a downgrade, qualification or withdrawal of the then current rating or ratings assigned to any Class of Certificates as evidenced in writing by each Rating Agency, as the successor to the Master Servicer or Special Servicer, as applicable, hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Master Servicer or Special Servicer hereunder. No appointment of a successor to the Master Servicer or Special Servicer hereunder shall be effective until the assumption by such successor of all the Master Servicer's or Special Servicer's responsibilities, duties and liabilities hereunder. Pending appointment of a successor to the Master Servicer, 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, PROVIDED, FURTHER, that if no successor to the Terminated Party can be obtained to perform the obligations of such Terminated Party hereunder, additional amounts shall be paid to such successor and such amounts in excess of that permitted the Terminated Party shall be treated as Realized Losses. The Depositor, the Trustee, the Master 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 7.03 NOTIFICATION TO CERTIFICATEHOLDERS. (a) Upon any termination pursuant to Section 7.01 above or appointment of a successor to the Master Servicer or the Special Servicer, the Trustee shall give prompt written notice thereof - 125 - to Certificateholders at their respective addresses appearing in the Certificate Register and to each Rating Agency. (b) Within 30 days after the occurrence of any Event of Default of which a Responsible Officer of the Trustee has actual knowledge, the Trustee shall transmit by mail to all Holders of Certificates and to each Rating Agency notice of such Event of Default, unless such Event of Default shall have been cured or waived. SECTION 7.04 OTHER REMEDIES OF TRUSTEE. During the continuance of any Master Servicer Event of Default or a Special Servicer Event of Default, so long as such Master Servicer Event of Default or Special Servicer Event of Default, if applicable, shall not have been remedied, the Trustee, in addition to the rights specified in Section 7.01, shall have the right, in its own name as trustee of an express trust, to take all actions now or hereafter existing at law, in equity or by statute to enforce its rights and remedies and to protect the interests, and enforce the rights and remedies, of the Certificateholders (including the institution and prosecution of all judicial, administrative and other proceedings and the filing of proofs of claim and debt in connection therewith). In such event, the legal fees, expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust Fund, and the Trustee shall be entitled to be reimbursed therefor from the Collection Account as provided in Section 3.06. Except as otherwise expressly provided in this Agreement, no remedy provided for by this Agreement shall be exclusive of any other remedy, and each and every remedy shall be cumulative and in addition to any other remedy and no delay or omission to exercise any right or remedy shall impair any such right or remedy or shall be deemed to be a waiver of any Master Servicer Event of Default or Special Servicer Event of Default, if applicable. SECTION 7.05 WAIVER OF PAST EVENTS OF DEFAULT; TERMINATION. The Holders of Certificates evidencing not less than 66-2/3% of the aggregate Voting Rights of the Certificates may, on behalf of all Holders of Certificates, waive any default by the Master Servicer or Special Servicer in the performance of its obligations hereunder and its consequences, except a default in making any required deposits (including P&I Advances) to or payments from the Collection Account or the Certificate Account or in remitting payments as received, in each case in accordance with this Agreement. Upon any such waiver of a past default, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon. ARTICLE VIII CONCERNING THE TRUSTEE SECTION 8.01 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 - 126 - which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Agreement and no permissive right of the Trustee shall be construed as a duty. During the continuance of an Event of Default of which a Responsible Officer of the Trustee has actual knowledge, the Trustee, subject to the provisions of Sections 7.02 and 7.05 shall exercise such of the rights and powers vested in it by this Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) The Trustee, upon receipt of any resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee which are specifically required to be furnished pursuant to any provision of this Agreement, shall examine them to determine whether they conform on their face to the requirements of this Agreement; PROVIDED, HOWEVER, that, the Trustee shall not be responsible for the accuracy or content of any such resolution, certificate, statement, opinion, report, document, order or other instrument provided to it hereunder. If any such instrument is found not to conform on its face to the requirements of this Agreement in a material manner, the Trustee shall take action as it deems appropriate to have the instrument corrected, and if the instrument is not corrected to the Trustee's reasonable satisfaction, the Trustee will provide notice thereof to the Certificateholders. (c) Neither the Trustee nor any of its officers, directors, employees, agents or "control" persons within the meaning of the Act shall have any liability arising out of or in connection with this Agreement, PROVIDED, that, subject to Section 8.02, no provision of this Agreement shall be construed to relieve the Trustee, or any such person, from liability for its own negligent action, its own negligent failure to act or its own willful misconduct or its own bad faith; and PROVIDED, FURTHER, that: (i) Prior to the occurrence of an Event of Default of which a Responsible Officer of the Trustee has actual knowledge, and after the curing or waiver of all such Events of Default which may have occurred, the duties and obligations of the Trustee shall be determined solely by the express provisions of this Agreement, the Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, no implied covenants or obligations shall be read into this Agreement against the Trustee and, in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any resolutions, certificates, statements, reports, opinions, documents, orders or other instruments furnished to the Trustee that conform on their face to the requirements of this Agreement without responsibility for investigating the contents thereof; (ii) The Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (iii) The Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of Holders of Certificates entitled to greater than 50% of the Percentage Interests (or such other - 127 - 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 any trust or power conferred upon the Trustee, under this Agreement; (iv) Neither the Trustee nor any of its respective directors, officers, employees, agents or control persons shall be responsible for any act or omission of any Custodian, Paying Agent or Certificate Registrar that is not an Affiliate of the Trustee and that is selected other than by the Trustee, performed or omitted in compliance with any custodial or other agreement, or any act or omission of the Master Servicer, Special Servicer, the Depositor or any other Person, including, without limitation, in connection with actions taken pursuant to this Agreement; (v) The Trustee shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its respective duties as Trustee in accordance with this Agreement (and, if it does, all legal expenses and costs of such action shall be expenses and costs of the Trust Fund), and the Trustee shall be entitled to be reimbursed therefor from the Collection Account, unless such legal action arises out of the negligence or bad faith of the Trustee or any breach of an obligation, representation, warranty or covenant of the Trustee contained herein; and (vi) The Trustee shall not be charged with knowledge of any act, failure to act or breach of any Person upon the occurrence of which the Trustee may be required to act, unless a Responsible Officer of the Trustee obtains actual knowledge of such failure. The Trustee shall be deemed to have actual knowledge of the Master Servicer's or the Special Servicer's failure to provide scheduled reports, certificates and statements when and as required to be delivered to the Trustee pursuant to this Agreement. None of the provisions contained in this Agreement shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any of the obligations of the Master Servicer or the Special Servicer under this Agreement, except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Master Servicer or the Special Servicer in accordance with the terms of this Agreement. Neither the Trustee nor the Fiscal Agent shall be required to post any surety or bond of any kind in connection with its performance of its obligations under this Agreement and neither the Trustee nor the Fiscal Agent shall be liable for any loss on any investment of funds pursuant to this Agreement except to the extent it is acting in its commercial capacity. SECTION 8.02 CERTAIN MATTERS AFFECTING THE TRUSTEE. (a) Except as otherwise provided in Section 8.01: (i) The Trustee may request and/or rely upon and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document reasonably believed by it to be genuine and to - 128 - have been signed or presented by the proper party or parties and the Trustee shall have no responsibility to ascertain or confirm the genuineness of any such party or parties; (ii) The Trustee may consult with counsel and any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such Opinion of Counsel; (iii) (A) The Trustee shall be under no obligation to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; (B) the right of the Trustee to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of any such act; and (C) PROVIDED, that subject to the foregoing clause (A), nothing contained herein shall relieve the Trustee of the obligations, upon the occurrence of an Event of Default (which has not been cured or waived) of which a Responsible Officer of the Trustee has actual knowledge, to exercise such of the rights and powers vested in it by this Agreement, and to use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs; (iv) Neither the Trustee nor any of its directors, officers, employees, Affiliates, agents or "control" persons within the meaning of the Act shall be personally liable for any action taken, suffered or omitted by it in good faith and reasonably believed by the Trustee to be authorized or within the discretion or rights or powers conferred upon it by this Agreement; (v) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by Holders of Certificates entitled to at least 25% (or such other percentage as is specified herein) of the Percentage Interests of any affected Class; PROVIDED, HOWEVER, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Agreement, the Trustee may require reasonable indemnity against such expense or liability as a condition to taking any such action. The reasonable expense of every such investigation shall be paid by the Master Servicer or the Special Servicer if an Event of Default shall have occurred and be continuing relating to the Master 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. - 129 - (b) Following the Start-up Day, neither the Trustee, the Master Servicer nor the Special Servicer shall, 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 any of REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC at any time that any Certificates are outstanding or subject any of REMIC I, REMIC II or REMIC III 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 8.03 TRUSTEE AND FISCAL AGENT NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS. The recitals contained herein and in the Certificates shall not be taken as the statements of the Trustee, the Fiscal Agent, the Master Servicer, or the Special Servicer and the Trustee, the Fiscal Agent, the Master Servicer and the Special Servicer assume no responsibility for their correctness. The Trustee, the Fiscal Agent, the Master Servicer and the Special Servicer make no representations or warranties as to the validity or sufficiency of this Agreement, other than the representations and warranties made by them herein, of the Certificates, other than the authentication thereof by the Authenticating Agent, or of any prospectus or offering circular used to offer the Certificates for sale or the validity, enforceability or sufficiency of any Mortgage Loan, or related document. Neither the Trustee nor the Fiscal Agent shall at any time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Mortgage, any Mortgage Loan, or the perfection and priority of any Mortgage or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Trust Fund or its ability to generate the payments to be distributed to Certificateholders under this Agreement. Without limiting the foregoing, neither the Trustee nor the Fiscal Agent shall be liable or responsible for: the existence, condition and ownership of any Mortgaged Property; the existence of any hazard or other insurance thereon (other than if the Trustee shall assume the duties of the Master Servicer pursuant to Section 7.02) or the enforceability thereof; the existence of any Mortgage Loan or the contents of the related Mortgage Loan File on any computer or other record thereof (other than if the Trustee shall assume the duties of the Master Servicer or the Special Servicer pursuant to Section 7.02); the validity of the assignment of any Mortgage Loan to the Trust Fund or of any intervening assignment; the completeness of any Mortgage Loan File; the performance or enforcement of any Mortgage Loan (other than if the Trustee shall assume the duties of the Master Servicer or the Special Servicer pursuant to Section 7.02); the compliance by the Depositor, the Master Servicer or the Special Servicer with any warranty or representation made by them 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 - 130 - discovery of any non-compliance therewith or any breach thereof; any investment of monies by or at the direction of the Master Servicer or any loss resulting therefrom, it being understood that the Trustee shall remain responsible for any Trust Fund property that it may hold in its individual capacity; the acts or omissions of any of the Depositor, the Master Servicer or the Special Servicer (other than if the Trustee shall assume the duties of the Master Servicer or Special Servicer pursuant to Section 7.02) or any sub-servicer or any Mortgagor; any action of the Master Servicer (other than if the Trustee shall assume the duties of the Master Servicer or Special Servicer pursuant to Section 7.02) or any sub-servicer taken in the name of the Trustee, except to the extent such action is taken at the express written direction of the Trustee; the failure of the Master Servicer or the Special Servicer or any sub-servicer 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 Master Servicer or the Special Servicer (other than if the Trustee shall assume the duties of the Master Servicer or the Special Servicer pursuant to Section 7.02) unless the taking of such action is not permitted by the express terms of this Agreement; PROVIDED, HOWEVER, that the foregoing shall not relieve the Trustee of its obligation to perform its duties as specifically set forth in this Agreement. Neither the Trustee nor the Fiscal Agent shall be accountable for the use or application by the Depositor, the Master 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 Master Servicer or the Special Servicer in respect of the assignment of the Mortgage Loans or deposited in or withdrawn from the Collection Account, Certificate Account, Lock Box Account, Cash Collateral Account or Reserve Accounts or any other account maintained by or on behalf of the Master Servicer or the Special Servicer, other than any funds held by the Trustee or the Fiscal Agent, as applicable. Neither the Trustee nor the Fiscal Agent shall have any responsibility for filing any financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder (unless the Trustee shall have become the successor Master Servicer or Special Servicer) or to record this Agreement. In making any calculation hereunder which includes as a component thereof the payment or distribution of interest for a stated period at a stated rate "to the extent permitted by applicable law," the Trustee shall assume that such payment is so permitted unless a Responsible Officer of the Trustee has actual knowledge, or receives an Opinion of Counsel (at the expense of the Person asserting the impermissibility) to the effect, that such payment is not permitted by applicable law. SECTION 8.04 TRUSTEE AND FISCAL AGENT MAY OWN CERTIFICATES. The Trustee, the Fiscal Agent and any agent of the Trustee and Fiscal Agent in its individual capacity or any other capacity may become the owner or pledgee of Certificates, and may deal with the Depositor, the Master Servicer and Special Servicer in banking transactions, with the same rights it would have if it were not the Trustee, the Fiscal Agent or such agent. SECTION 8.05 PAYMENT OF TRUSTEE'S FEES AND EXPENSES; INDEMNIFICATION. (a) The Trustee or any successor Trustee shall be entitled, on each Distribution Date, to the Trustee Fee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by the Trustee in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustee, which Trustee Fee shall be paid to the Trustee prior to the distribution on such Distribution - 131 - Date of amounts to the Certificateholders from funds available therefor pursuant to Section 3.06(v). In the event that the Trustee assumes the servicing responsibilities of the Master Servicer or the Special Servicer hereunder pursuant to or otherwise arising from the resignation or removal of the Master Servicer or the Special Servicer, the Trustee shall be entitled to the compensation to which the Master Servicer or the Special Servicer, as the case may be, would have been entitled except as expressly provided in Section 3.25(b). (b) The Trustee and the Fiscal Agent shall each be paid or reimbursed by the Trust Fund upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee or the Fiscal Agent pursuant to and in accordance with any of the provisions of this Agreement (including the reasonable compensation and the expenses and disbursements of its counsel and of all persons not regularly in its employ) to the extent such payments are "unanticipated expenses incurred by the REMIC" within the meaning of Treasury Regulations Section 1.860G-1(b)(iii) except any such expense, disbursement or advance as may arise from its negligence or bad faith; PROVIDED, HOWEVER, that, subject to the last paragraph of Section 8.01, neither the Trustee nor the Fiscal Agent shall refuse to perform any of its duties hereunder solely as a result of the failure to be paid the Trustee Fee and the Trustee's expenses or any sums due to the Fiscal Agent. The Master 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 Master Servicer or the Special Servicer, respectively, hereunder, pursuant to or otherwise arising from the resignation or removal of the Master Servicer or the Special Servicer, in accordance with any of the provisions of this Agreement (and including the reasonable fees and expenses and disbursements of its counsel and all other persons not regularly in its employ), except any such expense, disbursement or advance as may arise from the negligence or bad faith of the Trustee; PROVIDED, that in the event that the Master Servicer or the Special Servicer is terminated pursuant to Section 6.04(c), expenses incurred in connection with such transfer shall be paid by the Certificateholders effecting such termination. (c) Each of the Paying Agent, the Certificate Registrar, the Custodian and the Depositor (each, an "INDEMNIFYING PARTY") shall indemnify the Trustee and the Fiscal Agent and their respective Affiliates and each of the directors, officers, employees and agents of the Trustee, the Fiscal Agent and their respective Affiliates (each, an "INDEMNIFIED PARTY"), and hold each of them harmless against any and all claims, losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and any other costs, fees and expenses that the Indemnified Party may sustain in connection with this Agreement (including, without limitation, reasonable fees and disbursements of counsel incurred by the Indemnified Party in any action or proceeding between the Indemnifying Party and the Indemnified Party or between the Indemnified Party and any third party or otherwise) related to each such Indemnifying Party's respective willful misconduct, bad faith, fraud and/or negligence in the performance of each of it's respective duties hereunder or by reason of reckless disregard of its respective obligations and duties hereunder. (d) The Trust Fund shall indemnify each Indemnified Party from, and hold it harmless against, any and all losses, liabilities, damages, claims or unanticipated expenses (including, without limitation, reasonable fees and disbursements of counsel incurred by the Indemnified Party in any action or proceeding between the Indemnifying Party and the Indemnified Party or between the - 132 - Indemnified Party and any third party or otherwise) arising in respect of this Agreement or the Certificates, in each case to the extent and only to the extent, such payment are expressly reimbursable under this Agreement or are "unanticipated expenses incurred by the REMIC" within the meaning of Treasury Regulations Section 1.860G-1(b)(3)(iii), other than (i) those resulting from the negligence, fraud, bad faith or willful misconduct of the Indemnified Party and (ii) those as to which such Indemnified Party is entitled to indemnification pursuant to Section 8.05(c). The term "unanticipated expenses incurred by a REMIC" shall include any fees, expenses and disbursement of any separate trustee or co-trustee appointed hereunder, only to the extent such fees, expenses and disbursements were not reasonably anticipated as of the Closing Date and the losses, liabilities, damages, claims or expenses (including reasonable attorneys' fees) incurred or advanced by an Indemnified Party in connection with any litigation arising out of this Agreement, including, without limitation, under Section 2.03, Section 3.10, the third paragraph of Section 3.11, Section 4.05 and Section 7.01. The right of reimbursement of the Indemnified Parties under this Section 8.05(d) shall be senior to the rights of all Certificateholders. (e) Notwithstanding anything herein to the contrary, this Section 8.05 shall survive the termination or maturity of this Agreement or the resignation or removal of the Trustee or the Fiscal Agent, as the case may be, as regards rights accrued prior to such resignation or removal and (with respect to any acts or omissions during their respective tenures) the resignation, removal or termination of the Master Servicer, the Special Servicer, the Paying Agent, the Certificate Registrar or the Custodian. (f) This Section 8.05 shall be expressly construed to include, but not be limited to, such indemnities, compensation, expenses, disbursements, advances, losses, liabilities, damages and the like, as may pertain or relate to any environmental law or environmental matter. SECTION 8.06 ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee hereunder shall at all times be a corporation or association organized and doing business under the laws of any state or the United States of America, authorized under such laws to exercise corporate trust powers and to accept the trust conferred under this Agreement, having a combined capital and surplus of at least $50,000,000 and, at any time when there is no Fiscal Agent appointed and acting hereunder or any such Fiscal Agent so appointed has a rating on its long-term unsecured debt that is lower than "AA" by Fitch and S&P (without regard to any plus or minus or numeric qualifier), or fails to meet different standards provided that each Rating Agency shall have confirmed in writing that such different standards would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates, a rating on its unsecured long-term debt of at least "AA" by Fitch and S&P, and subject to supervision or examination by federal or state authority and shall not be an Affiliate of the Master Servicer or Special Servicer (except during any period when the Trustee has assumed the duties of the Master Servicer or Special Servicer pursuant to Section 7.02); PROVIDED that, notwithstanding that the long-term unsecured debt of the Trustee and the Fiscal Agent are not rated by S&P and Fitch, the Trustee shall not fail to qualify as Trustee solely by virtue of the lack of such ratings until such time as either S&P or Fitch shall notify the Trustee, the Master Servicer and the Special Servicer in writing that the Trustee is no longer exempt from the foregoing rating requirements imposed by this sentence. If a corporation or association publishes reports of condition at least annually, pursuant to law or to - 133 - the requirements of the aforesaid supervising or examining authority, then for purposes of this Section the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In the event that the place of business from which the Trustee administers the Trust Fund is a state or local jurisdiction that imposes a tax on the Trust Fund or the net income of a REMIC (other than a tax corresponding to a tax imposed under the REMIC Provisions) the Trustee shall elect either to (i) resign immediately in the manner and with the effect specified in Section 8.07, (ii) pay such tax and continue as Trustee or (iii) administer the Trust Fund from a state and local jurisdiction that does not impose such a tax. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, the Trustee shall resign immediately in the manner and with the effect specified in Section 8.07. SECTION 8.07 RESIGNATION AND REMOVAL OF THE TRUSTEE AND THE FISCAL AGENT. The Trustee and the Fiscal Agent may at any time resign and be discharged from their respective obligations and duties hereunder by giving written notice thereof to the Sellers, the Master Servicer, the Special Servicer and to all Certificateholders. Upon receiving such notice of resignation, the Master Servicer shall promptly appoint a successor Trustee or Fiscal Agent, by written instrument, in duplicate, which instrument shall be delivered to the resigning Trustee or Fiscal Agent and the successor Trustee or Fiscal Agent, as applicable. If no successor Trustee or Fiscal Agent shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee or Fiscal Agent may petition any court of competent jurisdiction for the appointment of a successor Trustee or Fiscal Agent. If at any time the Trustee or the Fiscal Agent shall cease to be eligible to continue as such under this Agreement, 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 of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Master Servicer may remove the Trustee or the Fiscal Agent and the Master Servicer shall promptly appoint a successor Trustee or successor Fiscal Agent by written instrument, which shall be delivered to the Trustee or Fiscal Agent so removed and to the successor Trustee or successor Fiscal Agent, as applicable. The Holders of Certificates entitled to at least 51% of the Voting Rights may at any time remove the Trustee or the Fiscal Agent and appoint a successor Trustee or successor Fiscal Agent by written instrument or instruments, in triplicate, signed by such Holders or their attorneys-in-fact duly authorized, one complete set of which instruments shall be delivered to the Master Servicer, one complete set to the Trustee or Fiscal Agent so removed, one complete set and one complete set to the successor Trustee or Fiscal Agent so appointed. If at any time the Trustee resigns or is removed, the Fiscal Agent may resign or the Master Servicer may remove the Fiscal Agent. Similarly, if at any time the Fiscal Agent resigns or is removed, the Trustee may resign or the Master Servicer may remove the Trustee. In the event that the Trustee or Fiscal Agent is terminated or removed pursuant to this Section 8.07, all of its rights and obligations under this Agreement and in and to the Mortgage Loans shall - 134 - be terminated, other than any rights or obligations that occurred prior to the date of such termination or removal (including the right to receive all fees, expenses and other amounts accrued or owing to it under this Agreement, plus interest at the Advance Rate on all such amounts until received to the extent such amounts bear interest as provided in this Agreement, with respect to periods prior to the date of such termination or removal). Any resignation or removal of the Trustee or Fiscal Agent and appointment of a successor Trustee or a successor Fiscal Agent pursuant to any of the provisions of this Section 8.07 shall not become effective until acceptance of appointment by the successor Trustee or Fiscal Agent as provided in Section 8.08. SECTION 8.08 SUCCESSOR TRUSTEE AND FISCAL AGENT. (a) Any successor Trustee and any Fiscal Agent appointed as provided in Section 8.07 shall execute, acknowledge and deliver to the Depositor, the Master Servicer and to the predecessor Trustee and predecessor Fiscal Agent, as the case may be, instruments accepting their appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee and predecessor Fiscal Agent, shall become effective and such successor Trustee and successor Fiscal Agent, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with the like effect as if originally named as Trustee or Fiscal Agent herein. The predecessor Trustee shall deliver to the successor Trustee all Mortgage Loan Files and related documents and statements held by it hereunder, and the Depositor and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for more fully and certainly vesting and confirming in the successor Trustee all such rights, powers, duties and obligations. No successor Trustee shall accept appointment as provided in this Section 8.08 unless at the time of such acceptance such successor Trustee shall be eligible under the provisions of Section 8.06. Upon acceptance of appointment by a successor Trustee as provided in this Section 8.08, the Depositor shall mail notice of the succession of such Trustee hereunder to all Holders of Certificates at their addresses as shown in the Certificate Register. If the Depositor fails to mail such notice within 10 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Depositor. (b) Any successor Trustee or Fiscal Agent appointed pursuant to this Agreement shall meet the eligibility requirements set forth in Section 8.06 hereof and shall be acceptable to each Rating Agency as evidenced by written confirmation that such appointment will not cause a downgrade, qualification or withdrawal of the then current ratings assigned to the Certificates. SECTION 8.09 MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, PROVIDED that such corporation shall be eligible under the provisions of Section 8.06, without the execution or filing of - 135 - any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. SECTION 8.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. Notwithstanding any other provisions hereof, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Fund or property securing the same may at the time be located, the Depositor and the Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Trustee to act (at the expense of the Trustee) as co-trustee or co-trustees, jointly with the Trustee, or separate trustee or separate trustees, of all or any part of the Trust Fund, and to vest in such Person or Persons, in such capacity, such title to the Trust Fund, or any part thereof, and, subject to the other provisions of this Section 8.10, such powers, duties, obligations, rights and trusts as the Depositor and the Trustee may consider necessary or desirable. If the Depositor shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, or in case an Event of Default shall have occurred and be continuing, the Trustee alone shall have the power to make such appointment. Except as required by applicable law, the appointment of a co-trustee or separate trustee shall not relieve the Trustee of its responsibilities, obligations and liabilities hereunder. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor Trustee under Section 8.06 hereunder and no notice to Holders of Certificates of the appointment of co-trustee(s) or separate trustee(s) shall be required under Section 8.08 hereof. In the case of any appointment of a co-trustee or separate trustee pursuant to this Section 8.10, all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Master Servicer hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Fund or any portion thereof in any such jurisdiction) shall be exercised and performed 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, 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 - 136 - provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. In no event shall any such separate trustee or co-trustee be entitled to any provision relating to the conduct of, affecting the liability of, or affording protection to such separate trustee or co-trustee that imposes a standard of conduct less stringent than that imposed by the Trustee hereunder, affording greater protection than that afforded to the Trustee hereunder or providing a greater limit on liability than that provided to the Trustee hereunder. Any separate trustee or co-trustee may, at any time, constitute the Trustee its agent or attorney-in-fact, with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 8.11 FISCAL AGENT APPOINTED; CONCERNING THE FISCAL AGENT. (a) The Trustee hereby appoints ______________________ as the initial Fiscal Agent hereunder for the purposes of exercising and performing the obligations and duties imposed upon the Fiscal Agent by Sections 3.24 and 4.06. (b) The Fiscal Agent undertakes to perform such duties and only such duties as are specifically set forth in Sections 3.24 and 4.06. (c) No provision of this Agreement shall be construed to relieve the Fiscal Agent from liability for its own negligent failure to act or its own willful misfeasance; PROVIDED, HOWEVER, that (i) the duties and obligations of the Fiscal Agent shall be determined solely by the express provisions of Sections 3.24 and 4.06, the Fiscal Agent shall not be liable except for the performance of such duties and obligations, no implied covenants or obligations shall be read into this Agreement against the Fiscal Agent and, in the absence of bad faith on the part of the Fiscal Agent, the Fiscal Agent may conclusively rely, as to the truth and correctness of the statements or conclusions expressed therein, upon any resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Fiscal Agent by the Depositor, the Master 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 8.01(c) shall apply to the Fiscal Agent. (d) Except as otherwise provided in Section 8.11(c), the Fiscal Agent also shall have the benefit of provisions of clauses (i), (ii), (iii) (other than the proviso thereto), (iv), (v) (other than the proviso thereto) and (vi) of Section 8.02(a). SECTION 8.12 MONITORING CERTIFICATEHOLDERS AND CONTROLLING CLASS REPRESENTATIVE. (a) Each Monitoring Certificateholder is hereby deemed to have agreed by virtue of its purchase of a Certificate to provide its name and address to the Trustee and to notify the Trustee of the transfer of any Certificate of the Monitoring Class, the selection of a Controlling Class Representative or the resignation or removal thereof. Any Certificateholder at any time appointed Controlling Class Representative is hereby deemed to have agreed by virtue of its purchase of a - 137 - Certificate to notify the Trustee when such Certificateholder is appointed Controlling Class Representative and when it is removed or resigns. (b) Within thirty (30) days of the Closing Date, the Trustee shall notify the Monitoring Certificateholders that they may select a Controlling Class Representative for purposes of Section 3.29 of this Agreement. Such notice shall set forth the process established by the Trustee in order to select a Controlling Class Representative. (c) Once a Controlling Class Representative has been selected pursuant to clause (b) above, each of the Master Servicer, the Special Servicer, the Depositor, the Trustee and each other Certificateholder (or Beneficial Owner, if applicable) shall be entitled to rely on such selection unless a majority of the Monitoring Certificateholders, by Class Balance, or such Controlling Class Representative shall have notified the Trustee and each other Monitoring Certificateholder, in writing, of the resignation of such Controlling Class Representative or the selection of a new Controlling Class Representative. Upon the resignation of a Controlling Class Representative, the Trustee shall request the Monitoring Certificateholders to select a new Controlling Class Representative. (d) Within two (2) Business Days (or as soon thereafter as practicable if Certificates of Monitoring Certificateholder are held in Book-Entry Form) of receiving a request from the Special Servicer pursuant to 3.29(l) the Trustee shall deliver to the Special Servicer and the Master Servicer a list of each Monitoring Certificateholder and the Controlling Class Representative including names and addresses. In addition to the foregoing, within two (2) Business Days of receiving notice of the selection of a new Controlling Class Representative or the existence of a new Monitoring Certificateholder, the Trustee shall notify the Special Servicer. (e) If at any time a Book-Entry Certificate belongs to the Monitoring Class, the Trustee shall notify the related Beneficial Owner or Beneficial Owners (through the Depository, unless the Trustee shall have been previously provided with the name and address of such Beneficial Owner or Beneficial Owners) of such event and shall request that it be informed of any change in the identity of the related Beneficial Owner from time to time. (f) Until it receives notice to the contrary each of the Servicers and the Trustee shall be entitled to rely on the most recent notification with respect to the identity of the Monitoring Certificateholders and the Controlling Class Representative. (g) The Controlling Class Representative will have no liability to the Certificateholders for any action taken, or for refraining from the taking of any action, in good faith pursuant to this Agreement, or for error in judgment; PROVIDED, HOWEVER, that the Controlling Class Representative will not be protected against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or negligence in the performance of duties or by reason of reckless disregard of obligations or duties. (h) By its acceptance of a Certificate, each Certificateholder shall be deemed to have confirmed its understanding that the Controlling Class Representative may take actions that favor the interest of one or more Classes of the Certificates over other Classes of the Certificates, and that - 138 - the Controlling Class Representative may have special relationships and interests that conflict with those of holders of some Classes of the Certificate; and, absent willful misfeasance, bad faith or negligence on the part of the Controlling Class Representative, each Certificateholder shall be deemed to have agreed to take no action against the Controlling Class Representative or any of its officers, directors, employees, principals or agents as a result of such a special relationship or conflict. SECTION 8.13 REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE AND THE FISCAL AGENT. (a) The Trustee hereby represents and warrants as of the Closing Date that: (i) The Trustee is a national banking association, duly organized, validly existing and in good standing under the laws governing its creation and existence and has full corporate power and authority to own its property, to carry on its business as presently conducted, and to enter into and perform its obligations under this Agreement; (ii) The execution and delivery by the Trustee of this Agreement have been duly authorized by all necessary corporate action on the part of the Trustee; neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated in this Agreement, nor compliance with the provisions of this Agreement, will conflict with or result in a breach of, or constitute a default under, (i) any of the provisions of any law, governmental rule, regulation, judgement, decrees or order binding on the Trustee or its properties that would materially and adversely affect the Trustee's ability to perform its obligations under this Agreement, (ii) the organizational documents of the Trustee, or (iii) the terms of any material agreement or instrument to which the Trustee is a party or by which it is bound; the Trustee is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental agency, which default would materially and adversely affect its performance under this Agreement; (iii) The execution, delivery and performance by the Trustee of this Agreement and the consummation of the transactions contemplated by this Agreement do not require the consent, approval, authorization or order of, the giving of notice to or the registration with any state, federal or other governmental authority or agency, except such as has been or will be obtained, given, effected or taken in order for the Trustee to perform its obligations under this Agreement; (iv) This Agreement has been duly executed and delivered by the Trustee and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting creditors' rights generally as from time to time in effect, and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and - 139 - (v) There are no actions, suits or proceeding pending or, to the best of the Trustee's knowledge, threatened, against the Trustee that, either in one instance or in the aggregate, would draw into question the validity of this Agreement, or which would be likely to impair materially the ability of the Trustee to perform under the terms of this Agreement. (b) The Fiscal Agent hereby represents and warrants as of the Closing Date that: (i) The Fiscal Agent is a foreign banking corporation duly organized, validly existing and in good standing under the laws governing its creation and existence and has full corporate power and authority to own its property, to carry on its business as presently conducted, and to enter into and perform its obligations under this Agreement; (ii) The execution and delivery by the Fiscal Agent of this Agreement have been duly authorized by all necessary corporate action on the part of the Fiscal Agent; neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated in this Agreement, nor compliance with the provisions of this Agreement, will conflict with or result in a breach of, or constitute a default under, (i) any of the provisions of any law, governmental rule, regulation, judgement, decrees or order binding on the Fiscal Agent or its properties that would materially and adversely affect the Fiscal Agent's ability to perform its obligations under this Agreement, (ii) the organizational documents of the Fiscal Agent, or (iii) the terms of any material agreement or instrument to which the Fiscal Agent is a party or by which it is bound; the Fiscal Agent is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental agency, which default would materially and adversely affect its performance under this Agreement; (iii) The execution, delivery and performance by the Fiscal Agent of this Agreement and the consummation of the transactions contemplated by this Agreement do not require the consent, approval, authorization or order of, the giving of notice to, or the registration with, any state, federal or other governmental authority or agency, except such as has been obtained, given, effected or taken prior to the date hereof; (iv) This Agreement has been duly executed and delivered by the Fiscal Agent and, assuming due authorization, execution and delivery by the other parties hereto, constitutes a valid and binding obligation of the Fiscal Agent, enforceable against the Fiscal Agent in accordance with its terms, subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting creditors' rights generally as from time to time in effect, and to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (v) There are no actions, suits or proceedings pending or, to the best of the Fiscal Agent's knowledge, threatened, against the Fiscal Agent that, either in any one instance or in the aggregate, would draw into question the validity of this Agreement, or which would be likely to impair materially the ability of the Fiscal Agent to perform under the terms of this Agreement. - 140 - ARTICLE IX TERMINATION SECTION 9.01 TERMINATION. The respective obligations and responsibilities under this Agreement of the Depositor, the Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent (other than the obligations to provide for and make payments and to send certain notices to Certificateholders as hereafter set forth and any indemnification provision) shall terminate upon payment to the Certificateholders and the deposit of all amounts held by or on behalf of the Master Servicer and the Trustee and required hereunder to be so paid or deposited on the Distribution Date following the earlier to occur of (i) the purchase by any of the Master Servicer, the Special Servicer (if the Master Servicer has not exercised its option), the holders of an aggregate Percentage Interest in excess of 50% of the Most Subordinate Class of Certificates (if neither the Master Servicer or the Special Servicer, has exercised its option) or any holder of a Class R-I Certificate (if neither the Master Servicer, the Special Servicer, nor the holders of an aggregate Percentage Interest in excess of 50% of the Most Subordinate Class has exercised its option) of all of the assets remaining in the Trust Fund at a price equal to the greater of (a) the sum of (1) the aggregate Repurchase Price of all the Mortgage Loans (other than REO Property) included in the Trust Fund, plus the appraised value of each REO Property, if any, included in the Trust Fund, as determined by the Depositor and (2) one month's accrued interest on the Scheduled Principal Balance of any REO Mortgage Loan and (b) the aggregate Class Balance of all the Certificates plus accrued and unpaid interest thereon; and (ii) the final payment or other liquidation (or any advance with respect thereto) of the last Mortgage Loan or REO Property remaining in the Trust Fund; PROVIDED, HOWEVER, that in no event shall the trust created hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date hereof. Any Person which shall make an election to purchase all of the Mortgage Loans remaining in the Trust Fund pursuant to clause (i) of the preceding paragraph shall do so by giving written notice to the Trustee and the Depositor no later than 60 days prior to the anticipated date of purchase; PROVIDED, HOWEVER, that no such election to purchase all of the Mortgage Loans remaining in the Trust Fund pursuant to clause (i) above shall be made unless the aggregate Scheduled Principal Balance of the Mortgage Loans remaining in the Trust Fund at the time of such election is less than 1% of the Scheduled Principal Balance of the Mortgage Loans as of the Cut-off Date. Notice of any termination shall be given promptly by any such Person electing to terminate by letter to Certificateholders mailed (a) in the event such notice is given in connection with the purchase of the Mortgage Loans and each REO Property, not earlier than the first day and not later than the 30th day of the month next preceding the month of the proposed final distribution on the Certificates or (b) otherwise during the month of such final distribution on or before the Determination Date in such month, in each case specifying (i) the Distribution Date upon which the Trust Fund will terminate and final payment of the Certificates will be made upon presentation and surrender of Certificates at the office of the Certificate Registrar therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Distribution - 141 - Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office of the Certificate Registrar. Unless it is acting as Certificate Registrar, the Trustee shall give such notice to the Certificate Registrar at the time such notice is given to Certificateholders. In the event such notice is given in connection with the purchase of all of the Mortgage Loans remaining in the Trust Fund as set forth above, the purchaser shall deposit in the Certificate Account not later than the last Business Day of the Collection Period relating to the Distribution Date on which the final distribution on the Certificates is to occur an amount in immediately available funds equal to the above-described purchase price. Upon receipt of an Officers' Certificate to the effect that such final deposit has been made, the Trustee shall release to the purchaser the Mortgage Loan Files for the remaining Mortgage Loans and shall execute all assignments, endorsements and other instruments necessary to effectuate transfer of the Mortgage Loans. Upon presentation and surrender of the Certificates by the Certificateholders on the final Distribution Date, the Trustee shall distribute to each Certificateholder so presenting and surrendering its Certificates (i) the amount otherwise distributable on such Distribution Date in accordance with Section 4.01 in respect of the Certificates so presented and surrendered, if not in connection with a purchase of all of the Mortgage Loans, or (ii) such Certificateholder's Percentage Interest of that portion of the Available Distribution Amount for such Distribution Date allocable to payments on the Class of Certificates so presented and surrendered as described below, if in connection with a purchase of all of the Mortgage Loans pursuant to this Section. If the Trust Fund is to terminate in connection with a purchase of all of the Mortgage Loans, the Available Distribution Amount for the final Distribution Date shall be allocated in the order set forth in Section 4.01. ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.01 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 10.02 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. - 142 - No Certificateholder shall have any right to institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement or any Mortgage Loan, unless such Holder previously shall have given to the Trustee a written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of Certificates representing Percentage Interests of at least 25% of each affected Class of Certificates shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding. It is understood and intended, and expressly covenanted by each Certificateholder with every other Certificateholder and the Trustee, that no one or more Holders of Certificates of any Class shall have any right in any manner whatever by virtue of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of such Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Certificates of such Class. For the protection and enforcement of the provisions of this Section, each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 10.03 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 10.04 NOTICES. All demands, notices and communications hereunder shall be in writing, shall be deemed to have been given upon receipt (except that notices to Holders of Class R-I, Class R-II and Class R-III Certificates or Holders of any Class of Certificates no longer held through a Depository and instead held in registered, definitive form shall be deemed to have been given upon being sent by first class mail, postage prepaid) as follows: If to the Trustee, to: ----------------------- ----------------------- Attention: ----------------------- If to the Fiscal Agent, to: ----------------------- - 143 - ----------------------- Attention: ---------------------- If to the Depositor, to: ICIFC Secured Assets Corp. 1 Park Plaza, Suite 430 Irvine, California 92614 Attention: _______________________ If to the Master Servicer, to: ----------------------- ----------------------- Attention: ----------------------- With copies to: ----------------------- ----------------------- Attention: ----------------------- If to the Special Servicer, to: ----------------------- ----------------------- Attention: ----------------------- If to the Sellers, to: ----------------------- ----------------------- Attention: ----------------------- ----------------------- ----------------------- - 144 - ----------------------- Attention: ----------------------- 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 10.05 SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then, 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 10.06 NOTICE TO THE DEPOSITOR AND EACH RATING AGENCY. (a) The Trustee shall use its best efforts to promptly provide notice to the Depositor and each Rating Agency with respect to each of the following of which a Responsible Officer of the Trustee has actual knowledge (provided that the Trustee shall be under no obligation to make an investigation concerning whether any such event has occurred): (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 Master Servicer, Special Servicer, the Trustee or Fiscal Agent; (iv) the repurchase of Mortgage Loans pursuant to Section 2.03(b); (v) the final payment to any Class of Certificateholders; (vi) any change in the location of the Collection Account or the Certificate Account; (vii) any event that would result in the voluntary or involuntary termination of any insurance of the accounts of the Master Servicer; (viii) each report to Certificateholders described in Section 4.02 and Section 3.22; (ix) any change in the lien priority of a Mortgage Loan; - 145 - (x) any new lease of an anchor or a termination of an anchor lease at a retail Mortgaged Property; (xi) any termination of licensing certification at a Mortgaged Property securing a senior housing/healthcare Mortgage Loan; and (xii) any material damage to a Mortgaged Property. (b) The Master Servicer shall promptly furnish to each Rating Agency copies of the following: (i) each of its annual statements as to compliance described in Section 3.14; (ii) each of its annual independent public accountants' servicing reports described in Section 3.15; and (iii) a copy of each rent roll and each operating and other financial statement and occupancy reports, to the extent such information is required to be delivered under a Mortgage Loan, in each case to the extent collected pursuant to Section 3.03. (c) The Master Servicer shall furnish each Rating Agency with such information with respect to the Trust Fund, a Mortgaged Property, a Mortgagor and a non-performing or Specially Serviced Mortgage Loan as such Rating Agency shall reasonably request and which the Master Servicer can reasonably obtain. The Rating Agencies shall not be charged any fee or expense in connection therewith. (d) Notices to each Rating Agency shall be addressed as follows: Standard & Poor's Rating Services 26 Broadway New York, New York 10004 Attention: Commercial Mortgage Surveillance Group Fitch Investors Service, L.P. One State Street Plaza New York, New York 10004 Attention: Commercial Mortgage Surveillance Group or in each case to such other address as either Rating Agency shall specify by written notice to the parties hereto. SECTION 10.07 AMENDMENT. This Agreement or any Custodial Agreement may be amended from time to time by the Depositor, the Master 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 - 146 - provisions herein or therein that may be defective or inconsistent with any other provisions herein or therein, (iii) to amend any provision hereof to the extent necessary or desirable to maintain the rating or ratings assigned to each of the Classes of Certificates by each Rating Agency, (iv) to amend or supplement any provisions herein or therein that shall not adversely affect in any material respect the interests of any Certificateholder not consenting thereto, as evidenced in writing by an Opinion of Counsel, at the expense of the party requesting such amendment, or confirmation in writing from each Rating Agency that such amendment or supplement will not result in a qualification, withdrawal or downgrading of the then-current ratings assigned to the Certificates, or (v) to make any other provisions with respect to matters or questions arising under this Agreement, which shall not be inconsistent with the provisions of this Agreement and will not result in a downgrade, qualification or withdrawal of the then current rating or ratings then assigned to any outstanding Class of Certificates, as confirmed by each Rating Agency in writing. This Agreement or any Custodial Agreement may also be amended from time to time by the Depositor, the Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent with the consent of the Holders of each of the Classes of Certificates representing not less than 66-2/3% of the Percentage Interests of each Class of Certificates affected by the amendment for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Certificateholders; PROVIDED, HOWEVER, that no such amendment shall: (i) reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be distributed on any Certificate without the consent of all the holders of all Certificates representing all Percentage Interests of the Class or Classes affected thereby; (ii) change the percentages of Voting Rights of Holders of Certificates which are required to consent to any action or inaction under this Agreement, without the consent of the Holders of all Certificates representing all of the Percentage Interest of the Class or Classes affected hereby; (iii) alter the Servicing Standard or the Special Servicing Standard or the obligations of the Master Servicer, the Trustee or the Fiscal Agent to make a P&I Advance or Property Advance without the consent of the Holders of all Certificates representing all of the Percentage Interests of the Class or Classes affected thereby; or (iv) amend any section hereof which relates to the amendment of this Agreement without the consent of all the holders of all Certificates representing all Percentage Interests of the Class or Classes affected thereby. Further, the Depositor, the Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent, at any time and from time to time, without the consent of the Certificateholders, may amend this Agreement to modify, eliminate or add to any of its provisions to such extent as shall be necessary to maintain the qualification of the REMICs formed hereunder as three 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 - 147 - Counsel (obtained at the expense of the Trust Fund), is necessary or helpful to maintain such qualification or to prevent the imposition of any such taxes, and would not adversely affect in any material respect the interest of any Certificateholder. In the event that neither the Depositor nor any successor thereto, if any, is in existence, any amendment under this Section 10.07 shall be effective with the consent of the Trustee, the Fiscal Agent, the Master Servicer and the Special Servicer, in writing, and to the extent required by this Section, the Certificateholders. Promptly after the execution of any amendment, the Master Servicer shall forward to the Trustee and the Trustee shall furnish written notification of the substance of such amendment to each Certificateholder and each Rating Agency. It shall not be necessary for the consent of Certificateholders under this Section 10.07 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The method of obtaining such consents and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable regulations as the Trustee may prescribe; PROVIDED, HOWEVER, that such method shall always be by affirmation and in writing. Notwithstanding any contrary provision of this Agreement, no amendment shall be made to this Agreement or any Custodial Agreement unless, if requested by the Master Servicer and/or the Trustee, the Master Servicer and the Trustee shall have received an Opinion of Counsel, at the expense of the party requesting such amendment (or, if such amendment is required by either Rating Agency to maintain the rating issued by it or requested by the Trustee for any purpose described in clause (i) or (ii) of the first sentence of this Section, then at the expense of the Trust Fund), to the effect that such amendment will not cause any of REMIC I, REMIC II or REMIC III 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 Master Servicer may request and shall be entitled to rely conclusively upon an Opinion of Counsel, at the expense of the party requesting such amendment (or, if such amendment is required by either Rating Agency to maintain the rating issued by it or requested by the Trustee for any purpose described in clause (i), (ii), (iii) or (v) (which do not modify or otherwise relate solely to the obligations, duties or rights of the Trustee) of the first sentence of this Section, then at the expense of the Trust Fund) stating that the execution of such amendment is authorized or permitted by this Agreement. The Trustee and the Fiscal Agent may, but shall not be obligated to, enter into any such amendment which affects the Trustee's or the Fiscal Agent's own rights, duties or immunities under this Agreement. SECTION 10.08 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 - 148 - represented by the Certificates. It is, further, not the intention of the parties that such conveyance be deemed a pledge of the Trust Fund by the Depositor to the Trustee to secure a debt or other obligation of the Depositor. However, in the event that, notwithstanding the intent of the parties, the Trust Fund is held to continue to be property of the Depositor then (a) this Agreement shall also be deemed to be a security agreement under applicable law; (b) the transfer of the Trust Fund provided for herein shall be deemed to be a grant by the Depositor to the Trustee on behalf of Certificateholders of a first priority security interest in all of the Depositor's right, title and interest in and to the Trust Fund and all amounts payable to the holders of the Mortgage Loans in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including, without limitation, all amounts from time to time held or invested in the Collection Account and the Certificate 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 Mortgage 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 Delaware and Illinois Uniform Commercial Code; and (d) notifications to Persons holding such property, and acknowledgments, receipts or confirmations from Persons holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from, financial intermediaries, bailees or agents (as applicable) of the Trustee for the purpose of perfecting such security interest under applicable law. Any assignment of the interest of the Trustee pursuant to any provision hereof shall also be deemed to be an assignment of any security interest created hereby. The Depositor shall, and upon the request of the Master Servicer, the Trustee shall, to the extent consistent with this Agreement (and at the expense of the Trust Fund), take such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of this Agreement. It is the intent of the parties that such a security interest would be effective whether any of the Certificates are sold, pledged or assigned. SECTION 10.09 NO INTENDED THIRD-PARTY BENEFICIARIES. No Person other than a party to this Agreement and any Certificateholder shall have any rights with respect to the enforcement of any of the rights or obligations hereunder. Without limiting the foregoing, the parties to this Agreement specifically state that no Mortgagor, property manager or other party to a Mortgage Loan is an intended third-party beneficiary of this Agreement. - 149 - IN WITNESS WHEREOF, the Depositor, the Master Servicer, the Special Servicer, the Trustee and the Fiscal Agent have caused their names to be signed hereto by their respective officers thereunto duly authorized all as of the day and year first above written. ICIFC SECUREDASSETS CORP., as Depositor By:-------------------------- Name:------------------------ Title:----------------------- ---------------------------, as Master Servicer By:-------------------------- Name:------------------------ Title:----------------------- ---------------------------, as Special Servicer By:-------------------------- Name:------------------------ Title:----------------------- ---------------------------, as Trustee, Custodian, Certificate Registrar and Paying Agent By:-------------------------- Name:------------------------ Title:----------------------- ---------------------------, as Fiscal Agent By:-------------------------- Name:------------------------ Title:----------------------- STATE OF _____________ ) ) ss: COUNTY OF ___________ ) On this ____ 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 s/he resides at ______________________________________________; that s/he is the _____________ of ___________________________________, a __________________, the corporation described in and that executed the foregoing instrument; and that s/he signed her/his name thereto under authority of the board of directors of said corporation and on behalf of such corporation. WITNESS my hand and seal hereto affixed the day and year first above written. ----------------------------------------------- Notary Public in and for the State of _________ This instrument prepared by: - --------------------------- Name:---------------------- Address:------------------- - --------------------------- STATE OF _____________ ) ) ss: COUNTY OF ___________ ) On this ____ 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 s/he resides at ______________________________________________; that s/he is the _____________ of ___________________________________, a __________________, the corporation described in and that executed the foregoing instrument; and that s/he signed her/his name thereto under authority of the board of directors of said corporation and on behalf of such corporation. WITNESS my hand and seal hereto affixed the day and year first above written. ----------------------------------------------- Notary Public in and for the State of _________ STATE OF _____________ ) ) ss: COUNTY OF ___________ ) On this ____ 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 s/he resides at ______________________________________________; that s/he is the _____________ of ___________________________________, a __________________, the corporation described in and that executed the foregoing instrument; and that s/he signed her/his name thereto under authority of the board of directors of said corporation and on behalf of such corporation. WITNESS my hand and seal hereto affixed the day and year first above written. ----------------------------------------------- Notary Public in and for the State of _________ This instrument prepared by: - --------------------------- Name:---------------------- Address:------------------- - --------------------------- STATE OF _____________ ) ) ss: COUNTY OF ___________ ) On this ____ 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 s/he resides at ______________________________________________; that s/he is the _____________ of ___________________________________, a __________________, the corporation described in and that executed the foregoing instrument; and that s/he signed her/his name thereto under authority of the board of directors of said corporation and on behalf of such corporation. WITNESS my hand and seal hereto affixed the day and year first above written. ----------------------------------------------- Notary Public in and for the State of _________ This instrument prepared by: - --------------------------- Name:---------------------- Address:------------------- - --------------------------- STATE OF _____________ ) ) ss: COUNTY OF ___________ ) On this ____ 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 s/he resides at ______________________________________________; that s/he is the _____________ of ___________________________________, a __________________, the corporation described in and that executed the foregoing instrument; and that s/he signed her/his name thereto under authority of the board of directors of said corporation and on behalf of such corporation. WITNESS my hand and seal hereto affixed the day and year first above written. ----------------------------------------------- Notary Public in and for the State of _________ EX-4.7 3 FORM OF LOAN SALE AGREEMENT Exhibit 4.7 LOAN SALE AGREEMENT This Loan Sale Agreement (the "AGREEMENT"), dated as of ____________, 1998, is between ICIFC Secured Assets Corp., as purchaser (the "PURCHASER"), and ______________________, as Seller (the "SELLER"). Capitalized terms used in this Agreement not defined herein shall have the meanings set forth in the Pooling and Servicing Agreement dated as of _____________, 1998 (the "POOLING AND SERVICING AGREEMENT") among the Purchaser, as depositor, _________________________, as servicer, _______________________, as special servicer, and _______________________, as trustee (in such capacity, the "TRUSTEE"), pursuant to which the Purchaser will sell the Mortgage Loans (as defined herein) to a trust fund and certificates representing ownership interest in the Mortgage Loans will be issued by the trust fund. For purposes of this Agreement, the "Mortgage Loans" refer to the mortgage loans listed on Exhibit A hereto and "Mortgaged Properties" refer to the properties securing such Mortgage Loans. The Purchaser and the Seller wish to prescribe the manner of sale of the Mortgage Loans from the Seller to the Purchaser and in consideration of the premises and the mutual agreements hereinafter set forth, agree as follows: SECTION I. SALE AND CONVEYANCE OF MORTGAGES: POSSESSION OF MORTGAGE FILE. The Seller does hereby sell, transfer, assign, set over and convey to the Purchaser all of its right, title, and interest in and to the Mortgage Loans described in Exhibit A hereto, including all interest and principal received on or with respect to the Mortgage Loans after the Cut-off Date (other than payments of principal and interest first due on the Mortgage Loans on or before the Cut-off Date), each related Mortgage File and, to the extent of its rights and obligations thereunder with respect to the Mortgage Loans, each Servicing Agreement. Upon sale of the Mortgage Loans, the ownership of each Mortgage Note, the Mortgage and the contents of the related Mortgage File will be vested in the Purchaser and immediately thereafter the Trustee and the ownership of records and documents with respect to the related Mortgage Loan prepared by or which come into the possession of the Seller shall immediately vest in the Purchaser and immediately thereafter the Trustee and shall be retained and maintained in trust, by the Seller at the will of the Purchaser and the Trustee in such custodial capacity only. The Seller's records will accurately reflect the sale of each Mortgage Loan to the Trustee. The Seller shall release its custody of the contents of any Mortgage File only in accordance with the Custodial Agreement. As the purchase price of the Mortgage Loans, the Purchaser shall pay to the Seller or at the Seller's direction the sum of (a) the net proceeds of the offering of the Certificates (net of any underwriting and placement agent fees) plus (b) the amount, as determined by the Seller and notified to the Purchaser, of any costs or expenses incurred by the Seller in connection with unwinding any hedges placed by the Seller on the Mortgage Loans. SECTION II. BOOKS AND RECORDS. From and after the sale of the Mortgage Loans to the Purchaser, record title to each Mortgage and the related Mortgage Note shall be transferred to the Trustee in accordance with this Agreement. All rights arising out of the Mortgage Loans, including, but not limited to, all funds received on or in connection with a Mortgage Loan, shall be received and held by the Seller in trust for the benefit of the Trustee as the owner of the Mortgage Loans. The transfer of each Mortgage Loan shall be reflected on the Seller's balance sheets and other financial statements as a sale of the Mortgage Loans by the Seller to the Purchaser. The Seller shall be responsible for maintaining, and shall maintain, a set of records for each Mortgage Loan which shall be clearly marked to reflect the ownership of each Mortgage Loan by the Trustee pursuant to the Pooling and Servicing Agreement. SECTION III. DELIVERY OF MORTGAGE LOAN DOCUMENTS. On the Delivery Date, the Seller shall deliver or cause to be delivered to the Trustee or its custodian each of the following documents for each Mortgage Loan: a. the original or, if accompanied by a "lost note" affidavit, a copy of the Mortgage Note, endorsed by the Seller in blank or to the order of the Trustee; b. the original Mortgage, and any intervening assignments (or certified copies of such assignments) thereof, in each case with evidence of recording indicated thereon or a certified copy thereof if not returned from the applicable recording officer; c. originals or certified copies of any related Assignment of Leases and Rents and any related Security Agreement (if, in either case, such item is a document separate from the Mortgage), any intervening assignments of each such document or instrument, and any related UCC Financing Statements; d. an assignment of the Mortgage, executed by the Seller in blank or to the order of the Trustee, with the assignment to the Trustee in the following form: "______________________, as trustee for ICIFC Secured Assets Corp. Pass-Through Certificates, Series 199__-__", in recordable form; e. assignments of any related Assignment of Leases and Rents and any related Security Agreement (if, in either case, such item is a document separate from the Mortgage), executed by the Seller or the prior holder which transferred such Mortgage Loan in blank or to the order of the Trustee, with the assignment to the trustee in the following form: "_________________, as trustee for ICIFC Secured Assets Corp. Pass-Through Certificates, Series __-__"; 2 f. originals or certified copies of all assumption, modification and substitution agreements in those instances where the terms or provisions of the Mortgage or Mortgage Note have been modified or the Mortgage Note has been assumed; g. the originals or certificates of a lender's title insurance policy issued on the date of the origination of such Mortgage Loan or, with respect to each Mortgage Loan not covered by a lender's title insurance policy, an attorney's opinion of title given by an attorney licensed to practice law in the jurisdiction where the Mortgage Property is located; h. with respect to any Mortgage Loan secured by a leasehold interest, a certified copy of the related ground lease; i. either (i) the originals of all intervening assignments, including warehousing assignments, with evidence of recording thereon, (ii) copies of such assignments certified by a title company or escrow company to be true and complete copies thereof where the originals have been transmitted for recording until such time as the originals are returned by the public recording office or (iii) copies of such assignments certified by the public recording offices where such assignments were recorded to be true and complete copies thereof in those instances where the public recording offices retain the originals or where the original recorded assignments are lost; j. either (i) copies of the UCC-1 financing statements and any related continuation statements, each showing the mortgagor as debtor and the originator as secured party and each with evidence of filing thereon, together with a copy of each intervening UCC-2 or UCC-3 financing statement showing a complete chain of assignment from the secured party named in such UCC-1 financing statement to the Trustee with evidence of filing thereon disclosing the assignment to the Trustee of the security interest in the personal property securing the Mortgage Loan or (ii) copies of such financing statements certified to be true and complete copies thereof in instances where the original financing statements have been sent to the appropriate public filing office for filing; k. the original appraisal; and l. any escrow, guarantee and environmental liability agreement. 3 SECTION IV. TREATMENT AS A SECURITY AGREEMENT. The Seller, concurrently with the execution and delivery hereof, has conveyed to the Purchaser, all of its right, title and interest in and to the Mortgage Loans. The parties intend that such conveyance of the Seller's right, title and interest in and to the Mortgage Loans pursuant to this Agreement shall constitute a purchase and sale and not a loan. If such conveyance is deemed to be a pledge and not a sale, then the parties also intend and agree that the Seller shall be deemed to have granted, and does hereby grant, to the Purchaser, a first priority perfected security interest in all of its right, title and interest in, to and under the Mortgage Loans, all payments of principal or interest on such Mortgage Loans, all other payments made and to be made in respect of such Mortgage Loans and all proceeds thereof and that this Agreement shall constitute a security agreement under applicable law. If such conveyance is deemed to be a pledge and not a sale, the Seller consents to the Purchaser hypothecating and transferring such security interest in favor of the Trustee and transferring the obligation secured thereby to the Trustee. SECTION V. RECORDATION OF ASSIGNMENTS OF MORTGAGE. The Purchaser shall require, to the extent required in the Pooling and Servicing Agreement, the Seller to record in the appropriate public recording office for real property the intermediate assignments of the Mortgage Loans and the Assignments of Mortgage from the Seller to the Trustee in connection with the Pooling and Servicing Agreement. All recording fees relating to the initial recordation of such intermediate assignments and Assignments of Mortgage shall be paid by the Seller. SECTION VI. REPRESENTATIONS AND WARRANTIES. A. The Purchaser represents and warrants it is a corporation duly organized, validly existing, and in good standing in the State of California. B. The Seller represents and warrants it is a limited partnership duly organized, validly existing, and in good standing in the State of [_____________________]. C. The Seller represents and wan-ants that immediately prior to the sale and assignment contemplated herein, the Seller was the sole owner of the Mortgage Loans free and clear of any and all liens, pledges, charges of security interests of any nature and has full right and authority to sell and assign the same. D. The Seller and the Purchaser each represents and warrants to the other that: 1. it has the power and authority to own its property and to carry on its business as now conducted; 2. it has the power to execute, deliver and perform this Agreement; 3. the execution, delivery and performance of this Agreement have been duly authorized by all requisite action by such entity's board of directors or general 4 partner and will not violate or breach any provision of any organizational document or other agreement or instrument to which such entity is a party or by which it is bound, or constitute a default or result in an acceleration under any of the foregoing, or results in the violation of any law, rule, regulation, order, judgment or decree to which such party or its property is subject; and 4. this Agreement constitutes a legal, valid and binding obligation of such party enforceable in accordance with its terms, except as such enforcement may be limited by the provisions of any bankruptcy or insolvency law, or law relating to enforcement of creditors' rights generally, and by general principles of equity, regardless of whether enforcement is sought in a proceeding at law or in equity. E. The Seller further makes the representations and warranties as to the Mortgage Loans set forth in Exhibit B hereto as of the Delivery Date. The Seller hereby covenants and agrees that is shall cure any breach of such representations and warranties or repurchase any Mortgage Loans as to which there has been any such breach at the Purchase Price, to the extent that such breach materially and adversely affects the value of any Mortgage Loan or the interest of any Certificateholders therein. Such cure or repurchase shall occur within 90 days of the receipt of notice by the Seller of any such breach of a representation and warranty in accordance with Section 2.04 of the Pooling and Servicing Agreement. F. The representations and warranties of the parties hereto shall survive the execution and delivery and any termination of this Agreement. SECTION VII. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement. SECTION VIII. GOVERNING LAW. This Agreement shall be construed in accordance with the laws of the State of ____________ and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. SECTION IX. NO THIRD-PARTY BENEFICIARIES. The parties do not intend the benefits of this Agreement to insure to any third party except as expressly set forth in Section X. SECTION X. ASSIGNMENT. The Seller hereby acknowledges that the Purchaser has, concurrently with the execution hereof, executed and delivered in the Pooling and Servicing Agreement and that, in connection therewith, it has assigned its rights hereunder to the Trustee for the benefit of the Certificateholders. 5 SECTION XI. NOTICES. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by first class or registered mail, postage prepaid, to (i) in the case of the Purchaser, ICIFC Secured Assets Corp., 20371 Irvine Avenue, Santa Ana Heights, California 92707, Attention: Bill Endersen, (ii) in the case of the Seller, _________________________________, _______________________, ________________________ Attention: ______________, and (iii) in the case of any of the preceding parties, such other address as may hereafter be furnished to the other party in writing by such Parties. SECTION XII. AMENDMENT. This Agreement may be amended only by a written instrument which specifically refers to this Agreement and is executed by the Purchaser and the Seller. This Agreement shall not be deemed to be amended orally or by virtue of any continuing custom or practice. SECTION XIII. COUNTERPARTS. This Agreement may be executed in any number of counterparts, and by the parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Purchaser and the Seller have caused their names to be signed hereto by this respective officers thereunto duly authorized as of the day and year first above written. ICIFC SECURED ASSETS CORP. By:______________________________ Name:____________________________ Title:___________________________ [SELLER] By:_____________________________ Name:___________________________ Title:__________________________ 6 EXHIBIT A MORTGAGE LOAN SCHEDULE EX-5.1 4 OPINION OF THACHER PROFFITT & WOOD EXHIBITS 5.1, 8.1 AND 23.1 -------------------------- January 13, 1997 ICIFC Secured Assets Corp. 20371 Irvine Avenue, Suite 200 Santa Ana Heights, California 92707 Re: ICIFC Secured Assets Corp. Mortgage Pass-Through Certificates and Mortgage-Backed Notes; REGISTRATION STATEMENT ON FORM S-3 ---------------------------------- Ladies and Gentlemen: We have acted as special counsel to ICIFC Secured Assets Corp., a California corporation (the "Registrant") in connection with the registration under the Securities Act of 1933, as amended (the "Act"), of Mortgage Pass-Through Certificates ("Certificates") and Mortgage-Backed Notes ("Notes"; and together with Certificates, "Securities"), and the related preparation and filing of a Registration Statement on Form S-3 (the "Registration Statement"). The Certificates are issuable in series under separate pooling and servicing agreements (each such agreement, a "Pooling and Servicing Agreement"), among the Registrant, a master servicer to be identified in the prospectus supplement for such series of Certificates and a trustee to be identified in the prospectus supplement for such series of Certificates. Each Pooling and Servicing Agreement will be substantially in the forms filed as an Exhibit to the Registration Statement. The Notes are issuable in series pursuant to separate indentures (each such indenture, an "Indenture"), between an issuer and an indenture trustee, each to be identified in the prospectus supplement for such series of Notes. Each Indenture will be substantially in the form filed as an Exhibit to the Registration Statement. ICIFC Secured Assets Corp. January 13, 1998 Page 2. In connection with rendering this opinion letter, we have examined the forms of the Pooling and Servicing Agreements and Indenture contained as Exhibits in the Registration Statement, the Registration Statement and such records and other documents as we have deemed necessary. As to matters of fact, we have examined and relied upon representations or certifications of officers of the Registrant or public officials. We have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures, the legal capacity of natural persons and the conformity to the originals of all documents. We have assumed that all parties, other than the Registrant, had the corporate power and authority to enter into and perform all obligations thereunder, and, as to such parties, we also have assumed the enforceability of such documents. In rendering this opinion letter, we express no opinion as to the laws of any jurisdiction other than the laws of the State of New York, nor do we express any opinion, either implicitly or otherwise, on any issue not expressly addressed below. In rendering this opinion letter, we have not passed upon and do not pass upon the application of "doing business" or the securities laws of any jurisdiction. This opinion letter is further subject to the qualification that enforceability may be limited by (i) bankruptcy, insolvency, liquidation, receivership, moratorium, reorganization or other laws affecting the enforcement of the rights of creditors generally and (ii) general principles of equity, whether enforcement is sought in a proceeding in equity or at law. Based on the foregoing, we are of the opinion that: 1. When a Pooling and Servicing Agreement for a series of Certificates has been duly authorized by all necessary action and duly executed and delivered by the parties thereto, such Pooling and Servicing Agreement will be a legal and valid obligation of the Registrant. 2. When an Indenture for a series of Notes has been duly authorized by all necessary action and duly executed and delivered by the parties thereto, such Indenture will be a legal and valid obligation of the applicable issuer. 3. When a Pooling and Servicing Agreement for a series of Certificates has been duly authorized by all necessary action and duly executed and delivered by the parties thereto, and when the Certificates of such series have been duly executed and authenticated in accordance with the provisions of that Pooling and Servicing Agreement, and issued and sold as contemplated in the Registration Statement and the prospectuses and prospectus supplements delivered in connection therewith, such Certificates will be legally and validly issued and outstanding, fully paid and non-assessable, and the holders of such Certificates will be entitled to the benefits of that Pooling and Servicing Agreement. 4. When an Indenture for a series of Notes has been duly authorized by all necessary action and duly executed and delivered by the parties thereto, and when the Notes of such series have been duly executed and authenticated in accordance with the provisions of that ICIFC Secured Assets Corp. January 13, 1998 Page 3. Indenture, and issued and sold as contemplated in the Registration Statement and the prospectuses and prospectus supplements delivered in connection therewith, such Notes will be legally and validly issued and outstanding, fully paid and non-assessable, and will be binding obligations of the applicable issuer, and the holders of such Notes will be entitled to the benefits of that Indenture. 5. The description of federal income tax consequences appearing under the heading "Certain Federal Income Tax Consequences" in the prospectuses contained in the Registration Statement, while not purporting to discuss all possible federal income tax consequences of an investment in Securities, is accurate with respect to those tax consequences which are discussed. We hereby consent to the filing of this opinion letter as an Exhibit to the Registration Statement, and to the use of our name in the prospectuses and prospectus supplements included in the Registration Statement under the heading "Legal Matters", and in the prospectuses included in the Registration Statement under the heading "Certain Federal Income Tax Consequences", without admitting that we are "experts" within the meaning of the Act, and the rules and regulations thereunder, with respect to any part of the Registration Statement, including this Exhibit. Very truly yours, /s/ Thacher Proffitt & Wood THACHER PROFFITT & WOOD EX-5.2 5 OPINION OF ANDREWS & KURTH L.L.P. Exhibit 5.2 January 13, 1998 ICIFC Secured Assets Corp. 20371 Irvine Avenue Santa Ana Heights, California 92707 Re: ICIFC Secured Assets Corp. Registration Statement on Form S-3 ---------------------------------- Ladies and Gentlemen: We have acted as counsel for ICIFC Secured Assets Corp., a corporation organized under the laws of the State of California (the "REGISTRANT"), in connection with the Registration Statement on Form S-3 (the "REGISTRATION STATEMENT") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "SECURITIES ACT"), on the date hereof for the registration of Pass-Through Certificates and Mortgage-Backed Notes. Each series of Certificates issued under the Commercial Loan Prospectus included in such Registration Statement will evidence interests in certain pools of commercial mortgage loans (the "CERTIFICATES"). Each series of Certificates will be issued pursuant to a Pooling and Servicing Agreement among the Registrant, a trustee, a master servicer or servicer and/or a special servicer, each to be specified in the prospectus supplement for such series of Certificates. We have made such investigation of law as we deem appropriate and have examined the proceedings heretofore taken and are familiar with the procedures proposed to be taken by the Registrant in connection with the authorization, issuance and sale of such Certificates. We have examined originals or copies, certified or otherwise identified to our satisfaction, of the Registrant's form of organizational documents, the form of Pooling and Servicing Agreement and the form of Certificates included therein and such other documents, records, certificates of the Issuer and public officials and other instruments as we have deemed necessary for the purposes of rendering this opinion. In addition, we have assumed that the Pooling and Servicing Agreement as completed for each series will be duly executed and delivered by each of the parties thereto; that the Certificates as completed for each series will be duly executed and delivered substantially in the forms contemplated by the Pooling and Servicing Agreement; and that the Certificates for each series will be sold as described in the Commercial Loan Prospectus included in the Registration Statement. Based upon the foregoing and subject to the limitations and qualifications set forth below, we are of the opinion that: (i) When each Pooling and Servicing Agreement in respect of which we have participated as your counsel has been duly authorized by all necessary corporate action and has been duly executed and delivered, it will constitute a valid and binding obligation of the Registrant enforceable in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency and similar laws affecting creditors' rights generally and subject, as to enforceability, to ICIFC Secured Assets Corp. January 13, 1998 Page 2 general principles of equity (regardless of whether enforcement is sought in a proceeding in equityor at law); and (ii) When the issuance, execution and delivery of the Certificates in respect of which we have participated as your counsel have been duly authorized by all necessary corporate action, and when such Certificates have been duly executed, authenticated and delivered and sold as described in the Commercial Loan Prospectus included in the Registration Statement, such Certificates will be legally and validly issued and the holders of such Certificates will be entitled to the benefits provided by the Pooling and Servicing Agreement pursuant to which such Certificates were issued. In rendering the foregoing opinions, we have assumed the accuracy and truthfulness of all public records of the Registrant and of all certifications, documents and other proceedings examined by us that have been executed or certified by officials of the Registrant acting within the scope of their official capacities and have not verified the accuracy or truthfulness thereof. We have also assumed the genuineness of the signatures appearing upon such public records, certifications, documents and proceedings. In addition, we have assumed that each such Pooling and Servicing Agreement and the related Certificates will be executed and delivered in substantially the form filed as exhibits to the Registration Statement, and that such Certificates will be sold as described in the Commercial Loan Prospectus included in the Registration Statement. We express no opinion as to the laws of any jurisdiction other than the substantive laws of the State of Texas, the General Corporation Law of the State of Delaware and the federal laws of the United States of America, and we express no opinion herein as to the effect that the laws and decisions of courts of any such other jurisdiction may have upon such opinions. We consent to the use and filing of this opinion as Exhibit 5.2 to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus Supplement and Commercial Loan Prospectus contained therein. In giving such consent we do not imply or admit that we are an expert with respect to any part of the Registration Statement, including this exhibit, within the meaning of the term "expert" as used in the Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Andrews & Kurth L.L.P. EX-8.2 6 OPINION OF ANDREWS & KURTH L.L.P. Exhibit 8.2 January 13, 1998 ICIFC Secured Assets Corp. 20371 Irvine Avenue Santa Ana Heights, California 92707 Re: ICIFC Secured Assets Corp. REGISTRATION STATEMENT ON FORM S-3 ---------------------------------- Ladies and Gentlemen: We have acted as counsel for ICIFC Secured Assets Corp., a corporation organized under the laws of the State of California (the "REGISTRANT"), in connection with the Registration Statement on Form S-3 (the "REGISTRATION STATEMENT") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "SECURITIES ACT"), on the date hereof for the registration of Pass-Through Certificates and Mortgage-Backed Notes. Each series of Certificates issued under the Commercial Loan Prospectus included in such Registration Statement will evidence interests in certain pools of commercial mortgage loans (the "CERTIFICATES"). Each series of Certificates will be issued pursuant to a Pooling and Servicing Agreement among the Registrant, a trustee, a master servicer or servicer and/or a special servicer, each to be specified in the prospectus supplement for such series of Certificates. We have advised the Registrant with respect to certain federal income tax consequences of the proposed issuance of the Certificates. This advice is summarized under the headings "Summary of Prospectus--Tax Status of the Certificates" and "Federal Income Tax Consequences" in the Commercial Loan Prospectus in respect of which we participated as your counsel, all as part of the Registration Statement. We have examined originals or copies, certified or otherwise identified to our satisfaction, of the Company's organizational documents and such other documents, records, certificates of the Company and public officials and other instruments as we have deemed necessary for the purposes of rendering this opinion. In addition, we have assumed that the Pooling and Servicing Agreement as completed for each series will be duly executed and delivered; that the Certificates as completed for each series will be duly executed and delivered substantially in the forms contemplated by the Pooling and Servicing Agreement; and that the Certificates for each series will be sold as described in the Commercial Loan Prospectus included in the Registration Statement. Based upon such examination and the qualifications set forth herein and in reliance thereon, we are of the opinion that the description of federal income tax consequences set forth under the headings "Summary of Prospectus--Tax Status of the Certificates" and "Federal Income Tax ICIFC Secured Assets Corp. January 13, 1998 Page 2 Consequences" in the Commercial Loan Prospectus, to the extent it constitutes matters of law or legal conclusions, is correct in all material respects. The opinion herein is based upon our interpretations of current law, including court authority and existing Final and Temporary Regulations, which are subject to change both prospectively and retroactively, and upon the facts and assumptions discussed herein. This opinion letter is limited to the matters set forth herein, and no opinions are intended to be implied or may be inferred beyond those expressly stated herein. Our opinion is rendered as of the date hereof and we assume no obligation to update or supplement this opinion or any matter related to this opinion to reflect any change of fact, circumstances, or law after the date hereof. In addition, our opinion is based on the assumption that the matter will be properly presented to the applicable court. Furthermore, our opinion is not binding on the Internal Revenue Service or a court. Our opinion represents merely our best legal judgment on the matters presented; others may disagree with our conclusion. There can be no assurance that the Internal Revenue Service will not take a contrary position or that a court would agree with our opinion if litigated. In the event any one of the statements, representations or assumptions we have relied upon to issue this opinion is incorrect, our opinion might be adversely affected and may not be relied upon. We hereby consent to the filing of this letter as an Exhibit 8.2 to the Registration Statement and to the reference to this firm under the captions "Federal Income Tax Consequences" in the Commercial Loan Prospectus and "Summary of Prospectus Supplement--Federal Income Tax Consequences" and "Federal Income Tax Consequences" in the Prospectus Supplement related to the Commercial Loan Prospectus, without implying or admitting that we are "experts" within the meaning of the Act or the rules and regulations of the Commission issued thereunder, with respect to any part of the Registration Statement, including this Exhibit 8.2. Sincerely, /s/ Andrews & Kurth L.L.P. -----END PRIVACY-ENHANCED MESSAGE-----